RESEARCH STUDY ON

PRODUCTIVITY & COMPETITIVENESS OF TOY

MANUFACTURING SECTOR IN INDIA

SPONSORED BY

DEPARTMENT OF INDUSTRIAL POLICY AND

PROMOTION (DIPP)
MINISTRY OF COMMERCE & INDUSTRY
GOVERNMENT OF INDIA

PREPARED BY

ECONOMIC SERVICES GROUP

NATIONAL PRODUCTIVITY COUNCIL
NEW DELHI

SEPTEMBER 2017
 CONTENTS
Page Nos.

CHAPTER 1 INRODUCTION 1-5

CHAPTER 2 STRUCTURE OF INDIAN TOY 6-22

INDUSTRY

CHAPTER 3 PRODUCTIVITY AND GROWTH 23-26

OF REGISTERED TOY
MANUFACTURING SECTOR

CHAPTER 4 GLOBAL TOY MARKET AND 27-37

INDIA
CHAPTER 5 TOY INDUSTRY IN CHINA 38-48

CHAPTER 6 SWOT ANALYSIS OF INDIAN TOY 49-50

INDUSTRY

CHAPTER 7 TOXICITY AND SAFETY OF TOYS 51-59

CHAPTER 8 FIELD SURVEY FINDINGS: TOY 60-75

MANUFACTURING UNITS

CHAPTER 9 CONCERNS OF THE INDIAN TOY 76-85

INDUSTRY

CHAPTER 10 SUMMARY, RECOMMENDATIONS 86-89

AND WAY FORWARD

Annexure 1.1. Survey Questionnaire for Toy 90-85

Manufacturing Sector:
Company/Manufacturing Unit: Modern
Toy Sector

Annexure 1.2. Survey Questionnaire for Toy 95-98

Manufacturing Sector:
Company/Manufacturing Unit:
Traditional Toy Sector
Research Study on Productivity & Competitiveness of Toy Manufacturing Sector in India

CHAPTER 1

INTRODUCTION
1.1 Background

Toys play an important role as cultural ambassadors reflecting 5000 years of Indian
civilization. Toys manufactured across the country reflect the cultural diversity of the country.
India produces a wide range of Toys viz., plastic, mechanical, soft/plush dolls & animals,
board games, puzzles, educational games, metal and tin, wood, Battery operated pullback
Toys etc. Indian toys are made from diverse raw materials like, plastic, wood, rubber, metal,
textiles etc. Toy Industry in India has witnessed a lot of changes over the last decade in terms
of categories of toys, innovation, eye-catching design and other aspects. Traditionally, Toy
sector is a labor intensive industry; it provides tremendous employment opportunities to over
3 million workers of which women constitute about 70 percent of workers.

The toy industry is mainly based in small and cottage sectors, with about 4000 manufacturing
units comprising of micro (75%), small and medium (22%) and large (3%) units. The toy
manufacturers are mostly located in Delhi, Mumbai, and Punjab, Uttar Pradesh, Haryana,
Tamil Nadu and clusters across central Indian states. Manufacturing of toys in India utilize
local skills of master craftsmen and creative designing. Indian toy industry comprises of large
number of indigenous manufacturers and a few leading global companies.

The toy market has two broad segments such as the “organized” segment, which represents
about one-third of the market, and the “unorganized” segment. Mom-and-Pop shops (also
known as “Kirana”) are mainly “unorganized” outside the main urban centers, and
predominantly operate on a cash-and-carry basis. The size of Indian Toy industry is about
Rs.8000 crores of which Rs.3000 crores accounted for by organized sector whereas about
Rs.5000 crores accounted by the unorganized sector. The “organized” sector stores are
available in big cities – mainly toy specialty stores such as RCS in New Delhi, Hamleys in
Mumbai or Prijanka in Hyderabad. Some large MNC toy manufacturing units like Mattel and
Funskool have their presence at major cities in India. Funskool is the largest toy manufacturer
in India with 30% share, followed by Mattel (20%), Hasbro (9%), Bandai (4%) and Lego
(4%) and Leap Frog (3%) and the others accounts for about 30%.

The Indian toy industry has shown tremendous growth and expansion potential in the
domestic market that is estimated at about US $850 million and it generated 0.5 percent of the
global market. The growing awareness among parents in India coupled with increasing
personal disposable income led to the growth of toy market and particularly for educational
toys and games that offer creativity and lead to the development of the brain of the child.
Besides, there is huge demand of Toys under literacy program such as Sarva Shiksha Abhiyan
run by Government of India.

According to Euro monitor study, spending on toys and games in India is set to grow at 157%
between 2009 and 2014, much faster than other Asian countries such as China (84%), Taiwan
(35%), South Korea (33.1%) and Singapore (17.2%). Indian parents spend an average of Rs

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250-300 on a toy and this is going up with more and more innovation-driven high-end toys
and games - from high-priced board games and play games to BeyBlades and remote-
controlled planes -enter the market.

Internet retailing is becoming a more and more important distribution channel due to several
reasons. Consumers have increasing access to the internet and online retailers often have
better merchandise in terms of variety, new launches and offer of branded toys. Though the
online toy market represents a mere 5%, it is growing rapidly and is unlikely to have a major
influence on the overall demand in the next couple of years. India is producing quality toys,
which is unmatched elsewhere and therefore, the demand for Indian toys is rising by leaps and
bounds.

Dynamics of toy industry changed with the opening of the market for Chinese players.
Chinese toys are destroying the Indian toy industry and small and medium manufacturers are
almost on the verge of collapse due to severe comptetition. Indian toy industry is much
backward in comparison to China’s toy industry. Capitalizing on the advantage of the raw
materials and cost of labor, China has become the largest manufacturer and exporter of toys in
the world. It is estimated that about 85% of toys worldwide is produced in China. According
to China Toy and Juvenile Product Association, China’s toy exports totaled US$ 15.7 billion
in 2015.

According to industry body ASSOCHAM, spiraling exports have also decimated India’s
domestic toy manufacturers. In the last 4-5 years, 40% of Indian toy companies have
shutdown and another 20% are on the verge of closure. In terms of pricing, there is a huge gap
between locally-made toys and international brand name toys. As such, locally-made toys still
maintain a strong edge in the medium to low end segments of the market and practically
monopolize sales channels like the wholesale market and individually-run retailers. Among
the local manufacturers in India about 59% are still focusing on the production of cheap and
unbranded toys which appeals to the price-sensitive Indian consumers. In the future it is
expected that these companies will shift towards branded toys as well to stay competitive with
international companies.

With the lowering of tariff barriers, melting of international trade boundaries, the domestic
market is now open and the Indian toy industry is facing the challenge from the domestic
distributors and multinational competitors who import cheaper products mainly from China.
Only 20% of the Indian market is served by Indian toy manufacturers while the rest is served
by imported toys from different countries mainly from China and Italy.

1.2 Objectives of the study

 To study and document the overall structure of Indian Toy Industry.

 To measure the productivity and competitiveness of the toy industry in India vis a vis
China with a view to identify the factors responsible for the success of the toy sector
in China and to recommend adoption of relevant factors in India.
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 To develop a SWOT profile for the Indian Toy industry.

 Identify the major problems faced by Indian Toy Industry after the liberalization of the
economy through an all India field survey of manufacturing units.

 To study and analyze toxic aspects of some of the common raw material such as
Nickel, Lead salts, etc. used in the production of Toys.

 Identify the aspects and measures required for showcasing traditional toys in national
and international markets.

 Traditional toys like terracotta, wooden toys, paper toys, cane and stick toys,
traditional tin toys and collectables etc., having sizeable and up-gradation shall be
covered in the study.

 Study of export potential for traditional Indian toys and other toys manufactured also
shall be included.

 To undertake a wider interaction with various stake holders including Toy Industry
Associations to find out major problems and suggest policy recommendations.

 To suggest areas where further interventions are urgently required to improve

productivity and international competitiveness of the toy industry.

1.3 Methodology

The research study has been undertaken in three broad phases:

First phase of the study focused on secondary sources of data and literature. The data and
literature have been compiled from both published and unpublished literature sources for the
last six years with a view to understand the growth and development of toy manufacturing in
the country during XII Plan. The published data on toy industry is mainly compiled from
Director General Foreign Trade (DGFT) and Annual Survey of Industries, as per NIC 2008
classifications (three digit industries i.e. 324 - Manufacture of games and toys).

Second phase of the study includes a detailed field survey with structured questionnaires
across 137 Toy Manufacturing Units randomly selected from both traditional and modern
segments spread across various toy manufacturing clusters (55 from traditional toy segment
and 82 from modern toy segment) (Table 1.1 and Table 1.2). Field Survey has been
undertaken through specially structured questionnaires for Modern Toy Segment (Annexure
1.1) and Traditional Toy segment (Annexure 1.2).

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Table 1.1. Field Survey of Traditional Toy Manufacturing Units

Name of Clusters/ No. of Units

Sl. No. States
Locations (Nos)
1. Andhra Adilabad and Kondapalli 08
Pradesh
2. Gujarat Patan and Kutch 09
3. Karnataka Bangalore, Bangalore 11
Rural, Belgaum, and
Bellary
4. Uttar Agamgarh, Lucknow , 15
Pradesh Varanasi and Agra
5. West Bengal 24Pargana North, 12
Burdwan, Hoogly,
Murshidabad, and
Shantiniketen
Total 55

Table 1.2: Field Survey of Modern Toy Manufacturing Units

Name of Clusters/ No. of units
Sl. No. States
Locations (Nos)
1. Karnataka Bangalore 11
2. Telengana Hyderabad 01
3. Tamilnadu Chennai 01
4. Maharashtra Mumbai 14
5. Uttar Pradesh Meerut 14
6. Delhi Delhi/NCR 27
7. Gujarat Ahmadabad 05
8. West Bengal Kolkata 09
Total 82

The field data has been analyzed using Standard Statistical Software’s such as SPSS for
arriving at meaningful analytical tables for both traditional and modern toy segments
separately.

Third phase of the study included a one day National Seminar convened at Delhi on 17th
February 2016, involving all major stakeholder categories such as Department of
Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, Ministry of
Micro, Small and Medium Enterprises, Bureau of Indian Standards (BIS), IIT Delhi,
Sports Goods Export Promotion Council (SGEPC), Toy Industry Associations, Modern
Toy Manufacturers, Traditional Toy Manufacturers etc., The National Seminar was
organised under the title “Repositioning Indian Toy Industry under MAKE IN
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INDIA initiative for Global Competitiveness” where the stakeholders came together
and deliberated on various issues confronting the Toy sector and the outcome of the
national seminar has been included as a separate chapter in this report.

1.4 Chapter Scheme of the Report

The study report has been divided into ten chapters. Introduction has been presented in
chapter one. It includes background, objectives of the study, data source and methodology
followed for undertaking the study. Chapter two explains structure of Indian toy industry.
This chapter explains traditional toy industries and modern toy industries. Chapter three
discusses productivity and growth of registered toy manufacturing sector based on the
secondary data compiled from Annual Survey of Industries (ASI) registered toy
manufacturing units. Global toy market and India’s trade with world is analyzed in
chapter four. It shows position of India with respect to other countries in terms of market
share spending per kid etc. Chapter five provides toy industry in China. Chapter six
explains SWOT analysis of Indian toy industry. Toxicity and Safety of toys are discussed
in chapter seven. Chapter eight analyses field survey findings of the toy manufacturing
units for both categories of toy sector i.e. modern and traditional toy sector. Concerns of
the Indian toy industry based on the feedback received during the National Seminar are
given in Chapter nine. Chapter ten includes summary and recommendations emanating
from the study.

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CHAPTER 2

STRUCTURE OF INDIAN TOY INDUSTRY

2.1 Overview

History of Toys is as old as human civilization. Early humans made toys from materials found
in nature such as rocks, sticks and clay. In the modern era, toys are made from a wide range of
materials such as plastic, metal, clay, glass, cloth, woods etc. Toys excavated from the Indus
valley civilization (3000-1500 BC) include small-carts, whistles shaped like birds and toy
monkeys which could slide down a string. Use of new materials and technologies have added
value to a variety of toys.

Selling a toy often involves selling to three individuals simultaneously, namely the child, who
will use the toy, the mother, who is concerned about safety, space to play, etc., and the father
who controls the purse strings. The target market for the toy selling firms is middle class and
upper income group.

According to Dale Hoiberg and Indu Ramchandani, (2000) Indian toys can be categorized
into four groups:
1. Toys developed and produced by craftspeople
2. Mela toys, dynamic folk toys developed and produced by the artisans (skilled and
semi-skilled person)
3. Toys developed by the layperson or invented by children themselves for their own
unique purposes.
4. Factory made toys

A brief discussion on various toys made from a variety of materials is given below:

a. Metal Toys: Copper and bronze were the earliest non-ferrous metals which man shaped
into tools. References to the casting of bronze images were found in ancient texts like the
MatsyaPurana. Gujarat and Uttar Pradesh in the north and Tamil Nadu and Andhra Pradesh
in south India are known for their bronze and copper items.
b. Wooden Toys: Workmanship on wood has flourished in India over the centuries. Dolls
made from wood are very popular. Sikkim is known for its carved objects and dolls.
Traditional designs are carved on wood and then painted for giving the whole object a rich
effect.
c. Clay Toys: Terracotta is the most ancient and original form of expression of clay-art.
Terracotta figurines in India, ranging over a period of 3,000 years, belong to times both
before and after the use of stone in sculpture. Though it is fragile and disintegrates quickly,
a continuous stream of art throughout different stages of civilization can still be found.
Pottery in India has deep religious significance. Figurines of Gods and Goddesses are made
of clay during festivals like Durga Puja in Bengal and Ganesh Chaturthi in Maharashtra.
Also popular are the gram devtas (village deities) regularly created by local craftsmen.

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Delhi is known for its blue pottery which is almost translucent. The Jaipur Blue pottery is
even more unique with its arabesque.
d. Toys made of Stone: Orissa was traditionally known as "Utkal", land of excellence of art,
because of the vast communities of painters, potters, weavers and other artists who were
attached to the major temple complexes. In fact the art of stone carving in Orissa dates
back to Kalinga (previous name of Orissa) period. Stone carving is carried out on
sandstone, Nilgiri stone, soft stone (Kochilla) and serpentine stone. Popular themes include
the images of Hindu gods and goddesses and dancers. Makrana in Rajastan produces
fabulous marble dolls and figurines.
e. Glass Toys: It was the Mughals who discovered the decorative potential of glass - the fact
that when it is cut, it has the opalescence and the glitter of a myriad diamond. Glass
engravings from India, exported to Europe till the 16th century, are said to have influenced
the Venetians. Today this art has declined but glass items are still part of everyday life.
Saharanpur of Uttar Pradesh makes glass dolls and toys filled with colored liquid called
panchkora.
f. Paper Mache Toys: Paper Mache is a comparatively new craft in India, which has caught
on very well in many parts of the country, since the raw material is easily available and
inexpensive. Kashmir is famous for paper mache craft. Kashmir produces some of the most
beautifully handcrafted paper mache items. Gwalior in Madhya Pradesh makes paper
mache toys, while in Ujjain figures of popular deities are made of this material. Jaipur
(Rajasthan) and Chennai are also famous for their paper mache crafts.
g. Shola-Pith Toys: Figurines of Shola pith are another popular form of handicraft in certain
parts of India. Shola pith is a herbaceous plant growing wild in marshy and water-logged
areas. This material is used in West Bengal for making figurines, artistic decorations and
headgears for deities during festivals. Craftsmen of Tiruchirapalli in Tamil Nadu make
remarkable reproductions of well known temples in pith.
h. Cloth Toys: The cloth doll has been in existence for almost as long as cloth itself. Dolls
were made of cloth in ancient Egypt and cloth-dolls have been made ever since. They have
been more popular in some periods of history than others, but they have never been
forgotten. The main reason for this is that cloth is the easiest of all materials for a woman
to find. A mother could always use at least an old rag to fashion a doll for her child.
Besides the fact that it is always available, cloth is easy to work with and requires
practically no tools.
i. Electronic & Mechanical Toys: With the advent of modern technology such as
electronics and mechanics, the toy industry also has become highly sophisticated. All toys
whether electronic or mechanical have either educational or recreational value or both.
j. Tin Toys: Tin toys are the toys made out of tin metal.

All over the world, toys are classified according to their end use:

Toys and Board Games can be further classified into three broad categories.

a) Educational Toys and Board Games: Toys those demonstrate or project the educational
principles using simple tools and equipments in the field of science, geography,
mathematics, music and others.

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b) Mechanical Toys: Toys those are specifically used for development of motor skills fitted
with simple mechanical devices. These can be battery or electrically operated also.
c) Other Toys: Toys those are meant to give pleasure to children for their mental and
physical development viz, hand coordination, recognition of different size, shapes and
colors, etc.

However, in practice the above classifications of toys are overlapping in almost all cases. A
Mechanical Toy can also be an Educational Toy. Similarly, other toys can also be classified as
Educational Toys. Wide ranging inputs, by-products, recycled material, and everything
available as waste products can be used as inputs for manufacture of toys. A scale model or a
miniature form of any attractive product, instrument, vehicle, mode of transportation, animal
or historical character is generally depicted as a toy.

2.2 Toy Industry in India

2.2.1 Traditional Toys

Few products are as essential to human development as toys. Yet this sector has not received
its due institutional support and recognition. Development, production and sale of toys cover a
vast range of economic activities from tiny cottage craft unit to the sophisticated electronic
products manufactured on a mass scale. India has a great, rich tradition of craft toys produced
locally by the artisans and crafts communities all over India. Much of this great heritage has
been eroded due to neglect and lack of institutional support.

A widespread network of toy making crafts and cottage industries exists in India. There are
two broad types of such development and production communities.

• Communities focused largely on making utility products but also produce toys as a
seasonal or side activity.
 Those well-established communities whose main products are toys. These communities
work with many materials, including terracotta, wood, reeds, grass, pith, bamboo and
paper mache.

Traditional Toy Sector is not in competition with the formal toy manufacturing sector. The
product line is different. The problems are different, yet both sectors need relevant
institutional supports such as availability of materials, markets, design and development
support and promotion. In fact the traditional and the modern or formal sector can and should
co-exist and strengthen each other.

A study sponsored by Development Commissioner of Handicrafts, Government of India

undertaken by National Institute of Design (NID) during 1981-83 (Indian Toys: The Crafts
Sector, NID, 1983, A Reference project document) had documented various traditional toy
crafts available in India. The study included visits and meetings with traditional toy-making
communities all over India as well other stake holders. The study re-confirmed that there is
great potential with the family community trained artisans and crafts people who make toys
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using locally available materials, skills and themes. It was found that the difficulty in getting
the institutional assistance de motivated the sector. Therefore, some concrete measures are
needed to be taken to ensure healthy development of the crafts and artisan communities so
that they are motivated to let their children carry forward this traditional wealth of knowledge.

2.2.1.1 Major Toy Products and Clusters in India

In India, traditional toys can be categorized state wise as each state has its own specialty
products.

 Sambalpur in Orissa is one of the many places in our country well known for its
wooden toys and dolls. The simul tree grows in abundance in the district. The village
carpenters collect the wood and carve out a wide range of attractive toys. Toy making is a
traditional craft of the carpenters who practice it in their spare time. People from abroad
also come to purchase these beautiful toys. However, in local market there is no demand
for such toys. Being soft, the simul wood amenable easily to the carpenter's chisel. The
size and use of two or more bright indigenous colors distinguish the Sambalpur toys from
those of other parts of the country. The colorful Sambalpur toys are excellent specimen
of the village carpenter's craftsmanship (www.indiastudychannel.com). Puri in Orissa is
also famous for paper mache and stone toys. Raghu Gajpur near Puri in Orissa is a
landmark place for a variety of traditional toys.

 West Bengal is famous for its clay toys. Clay toys are also made in Jamnagar and
Rajgarh and Krishnanagar in Nadia district and in Shantiniketan. The features of
Krishnanagar toys are that they are very sharp and beautiful whereas the toys from
Shantiniketan in Bolpur are very realistic. The designs are predominantly rural and have
scenes and figures of the rural houses apart from temples and domestic animals. Clay
Dolls, Clay Animal Figures, huts and religious deities are commonly made. Making clay
figures involve a lot of detailing and has been done by hand since ages. Once the moulds
are made by hand, the toys are dried and then fired. The fired clay toys are then painted
with bright colors. This is a hereditary art form.

 Handmade clay toys of Madhya Pradesh are generally cast in hollow shapes though
solid figures are not uncommon. Animal figures like horses, elephants, dogs, lions, birds,
deer and bulls fixed on wheels are very popular with children. The figures are usually
small and artistically made with the solid figures being more popular than the hollow
ones. These dolls which are sold in pairs are all time favorites and when they are dressed
traditionally then nothing like it. Gwalior, in Madhya Pradesh makes rag dolls which are
made in a very traditional way by painting onto them facial expressions which liven up
the features. The costumes are traditionally made out of paper with boat shaped turbans
on their head and are draped in saris made out of paper with proper jewellery.
Budhnighat had about 20 families traditionally making turned wood lacquered toys since
generations. Some of them are still in the traditional craft making.

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 Tamil Nadu is famous for terracotta toys and the craft is flourishing in Chennai,
Kanchipuram and parts of Arcot district. The craft has passed down from generation to
generation and the artisans have a tradition of excellent workmanship and fine coloring.
 Clay toys are made in two stages; the first of which involves plaster of Paris mixed with
tapioca powder to form a paste which is dried till it can be rolled into layers. This is
pressed into the die to get the moulds. The raw material used is rock clay which after
being properly moistened, is pushed into the mould dusted with French chalk powder so
that it can be easily removed. It is then dried in the Sun before coloring. The work is
divided between the men who need the clay, roll it into layers, make the moulds and the
women who use brushes to do the colorings that are kept in coconut shells.

 The cloth and wire dolls of Karnataka are extremely traditional and a perfect piece of
art by the local artists. These dolls convey the traditions of Karnataka and also some of
the figures are of Indian legends. Dolls are made in many different patterns, such as wire
dolls, soft dolls, cone dolls and stuffed dolls. Artist first very carefully bent the wire to
form the frame of the proposed doll and the figure is wrapped tightly in cloth and stitched
into a 'skin' of brown poplin cloth. Designing and decoration is done once the main dress
is put on the skeleton. Their hair and make is done very carefully as these things
enhances the beauty of the dolls.

 The horse and the rider toys of Darbhanga (Bihar) are very famous. Toys are composed
of many different materials such as clay, mud, wood, cloth etc. The making of clay toys
and images is done seasonally. Once the festive season is over then the artists make the
necessary household utensils. Crafted images are made in many different designs.
Bamboo dolls are also crafted in Bihar.

 Crafts persons at Ranchi (Jharkhand) make attractive wooden toys which are painted in
nice and soothing colors. The figures of King- Queen and mother and child are the
famous ones. Spinsters and housewives make cloth dolls and are sold during the festival
seasons. These dolls are seen during the festive seasons. Chota Nagpur also has artists
who work on the wooden toys. The figures which have religious sentiments wherein the
artists spend a lot of time in making the features of each doll which make them look
beautiful. Black lines are used to outline the features.

 Toys in Assam are made in the most ethnic and the traditional way. Craftsmen of hills
design cane and bamboo toys using their skilled hands and few local tools. Figures of
Gods and Goddesses, animals and many mythological figures are crafted by the local
craftsmen of Golapara districts and are made out of clay. Pith toys are also made in this
region.

There is a tradition of making cloth dolls by the women folk of almost every family and
this craft is passed from mother to her daughter and this is how this craft is preserved in
Assam. Bamboo shotgun which can shoot up to 150 yards is a very demanding toy. Toys
made out of bamboo and wood are crafted in the shapes of birds, human figures and

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animals. Craftsmen also make dolls for the theatre craft .Bride and groom dolls are made
and attracts a lot of attention. These are made out of bamboo, mud, cloth and wood.

 Dolls are the attraction for every age group. The artisans of Haryana share the rural
image through their dolls. These dolls range from 6 inches to 32 inches. The dolls are
designed in the utmost rural beauty depicting the real scenes of village. Designing is such
that one has to see the handiwork to accept the truth that these are dummies. Doll images
of Sita and Ram are also made wearing proper costumes and jewellery. Bright colored
wooden toys of Haryana are famous which include infant walkers and many other pull
and push toys made by the local artists.

 Udaipur (Rajasthan) is a big centre for wooden toys. The craftsmen used local wood
‘doodhia’ which is soft and can be finely chiseled and shaped. The toys are lacquered and
polished with leaves of a flowering cactus to give them a better look and increase their
life. The large variety of toys made in Udaipur include the cart drawn by a sparrow,
kitchen sets, grinder, cradle on a stand, gas lantern, gramophones, trains, cars, jeeps,
aeroplanes, counting stands, and clock towers. Animal figures include horses, camels,
and elephants. Udaipur is also famous for imitation dry fruit which bear a striking
resemblance to the real fruits.

 Bassi in Chittorgarh (Rajasthan) district are another noted centre for wooden toys where
the entire village is engaged in wood-carving and in making wooden products. Jaipur too
is very well known for cloth dolls and toys which are generally dyed and stuffed with
waste material. These toys are beautifully decorated with colorful paper with expression
writ large on their faces.

 The craftsmen of Tripura, the bamboo rich state, have made indigenous toys using the
most abundant resource of the state to include the bamboo pop gun. The pop gun releases
a small pellet which is made of bamboo and is developed for the innumerable bird and
animal traps that are used locally.Tiny bamboo whistles made from small diameter cum
lengths and bamboo flutes of different types are also made which are used as toys or for
professional use. Apart from these, Agartala has a tradition of making small animals from
bamboo splits.
 Larger numbers of traditional toy-making units operate at Chennapatna in Karnataka.
There are household units as well as factories engaged in making toys and gift items with
the “turned wood” technique. In recent times, these communities face the major problem
of shortage of raw material. The toy makers have to face not only the shortage of wood
but they also lack the knack and marketing ability that is needed to sell their products.

Toys made from wood or clay or cloth may not match the sheen and finish of their mass-
manufactured counterparts, but they certainly help develop a child's motor and cognitive
skills. Made from natural materials - such as wood, cane, palm leaf, clay, soft soap stone and
cloth - these playmates are safe and enable an understanding and appreciation of nature very
early in life. Coated with natural dyes or vegetable colors, the toys are toxin-free. Even the
parts of the toys are joined together by natural gums or tamarind paste, rather than a synthetic
adhesive.
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For instance, stackers can aid in the ability to recognize similar objects, the 'pallankuzhi'
(traditional board game played in South India) helps sharpen mental calculation abilities and
the abacus improves mathematics. Different toys are recommended for different age groups.
Thus children between one and five years can amuse themselves with stackers, while pre-
schoolers can take their first steps towards counting with the help of a colorful abacus.

Table 2.1: Traditional Toy Clusters in India and product categories

States Districts Towns Types of Toys Description
Pottery and animal
Adilabad PRO Terracotta
and bird figures
Human forms, forms,
birds, fruits,
Adilabad
vegetables, models of
Andhra Nirmal Toys & Dolls
village activities,
Pradesh
mythological figures,
Kondapalli toys

Wooden carved
Kondapalli Kondapalli
toys

Cloth and wire Dolls and toys & dolls

Bangalore
dolls from pulp
Bangalore Toys, boxes, birds
Channapatna Lacquer ware
Rural and decorative
Karnataka Khanapur Pottery & Clay Pottery & Clay
Belgaum
Terracotta Terracotta
Belgaum Gokak Toys Toys
Printed wooden toys
Bellary Kinhal toys
and decorative
Typical dancing
Manipur Imphal Imphal Toys & Dolls
design of dolls
Rag Dolls, Raja/Rani
Chhattisgarh Raipur Raipur Rag Dolls
dolls, BattoBai doll
Cart drawn by a
sparrow, kitchen sets,
singardan (a box with
articles of toilet),
grinder, cradle on a
Toys and Dolls
stand, gramophone,
Rajasthan Chittaurgarh train, car, jeep, aero
plane, counting stand,
clock tower, figurers
of , imitate
Carved furniture,
Woodwork ritual items,
chowkies, sindoor

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box, figures of birds

Udaipur Wooden Toys

Himachal Kangra Palampur
Dolls & Toys
Pradesh
Agra Agra Paper mache
birds and
animals
Uttar Azamgarh Azamgarh Terracotta/clay
Pradesh toys
Lucknow Lucknow Miniature Toys
Varanasi Varanasi Wooden &
Clay Toys
Household articles,
Clay Folk Toys peasant figures, dolls
Cane & and toys, images of
24 Pargana
Bamboo Craft gods and goddesses,
flower-pots, huts,
carts, temples
Divinities including
Nagas&Naginis,
yakshas&Yakshis,
West Bengal 24 Pargana Chandraketugarh Terracotta
ApsarasKinnaras,
North
Vyantara, Devatas,
toys,
Barrackpur Soft Dolls Toys and dolls
Burdwan, Household articles,
Katwa Hoogly, Clay Folk Toys peasant figures, dolls
Murshidabad and toys
Krishnanagar Clay Dolls
Coloured wooden
Shantiniketan
toys
Gauripur Toys & Dolls
Vessels for storing
Assam grains, water pots,
Dhubrii Terracotta chaupatia, Handi,
Pottery Surahi, Images of
gods and goddesses,
Dolls and Toys
Dolls and Toys,
Bihar Ranchi
Wooden toys
Wooden toys
Sambalpur
and dolls
Paper mache&
Puri
Orissa wooden toys
Paper mache,
Raghurajpur clay and wood
toys

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Madhya
Gwalior Rag Dolls
Pradesh
Wooden
Toys/tuned
Idar&Mahura
wood lacquered
toys
Gujarat Scientific clay
Patan
toys
Clay /
Kutch Terracotta &
Rag Dolls

For decades, the small town Chennapatna, Karnataka thrived on the earnings from the making
of toys. However, the lack of investment, initiative and even skill to incorporate new designs,
along with the use of poor raw materials, resulted in a drop in demand for such toys.

Capitalizing on the knowledge and skill of the artisans and after studying market trends, a
local NGO namely Maya Organic recently developed a brand of wooden educational toys
called Moogli toys. All the toys go through strict quality checks established by the NGO.
There is a technical department that does the R&D and develops new designs. The artisans are
given extensive training in quality norms and standards before they begin work in groups of
60 to make toys in adherence to the norms. Once the toys are made and delivered to the NGO,
they are put through another quality check before being dispatched to shops.

Another non-profit organization in Bangalore, Sutradhar, has been responsible for reviving
traditional Indian board games. The organization develops methods to make learning a fun
with the help of toys, games and storybooks. Each toy or game has a link with Indian culture
and traditions. Sutradhar has revived 'Chausar' (the early source of the western Ludo) and
'pallankuzhi'. The games are packaged with a detailed booklet of the rules.

Organizations such as Maya and Sutradhar use technology to their advantage through
standardization and quality. Both have a catalogue of their products on their websites, where
orders can be placed - a huge step from the days when traditional Indian toys were available
only at small retail outlets, ‘haats’ (bazaars) or ‘melas’ (fairs). The emphasis on quality and
innovation along with Indianness has helped both children and profit margins.

The Traditional toys have many special advantages. The materials and process are usually
eco-friendly and inexpensive. There is design diversity, the batch production facilities change
and flexibility. The crafts people are usually very skilled and talented.

The negative point can be safety and hygiene aspect and that some NGOs or business houses
would need to handle the export of business on behalf of local producers.

Some NGOs have already established success in exporting Indian traditional toys. They are:
- Maya Organic , Bangalore
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- Sutradhar, Bangalore
- Kreeda, Chennai, producing redesigned traditional Dohan Gania
- Kalaraksha, Kutch (Gujarat) Redevelopment of local games and toys

The main factor is taking into account the hygiene and safety factors. Otherwise, the sector
has good scope for export provided agencies and NGO get interested to organize and manage
export business.

The main factors for export suitability are the diversity in design and development and quick
response to new orders and new design ideas. Each product or the batch can be marketed as a
unique one. The handwork is being valued and crafts people and usually very skilled in
innovation, design and development. What is needed is the involvement of trained designers
and NGOs interested to work in this sector.

2.2.1.2 Export Potential for Traditional Indian Toys

The Export Potential for Traditional Toys is very good.In the present eco-friendly era, these
traditional items though have less value for children but have a very large requirement by
parents wanting to keep them as collectables, to show children the different stages of Toy
developments and the shape and sizes of toys during their playing days.

 Suggest Traditional Toys are promoted through Indian Emporiums abroad.

 Taking Shelf space with big Toys & Handicraft stores abroad.
 Having exclusive stands at Gifts, Handicraft, and Toys International Fairs & India
Stand.

The safety and toxicity aspects for the traditional toys has to be studied and the measure taken
for this sector. At this moment, traditional toy sector is being co-ordinated mainly by the
Development Commissioner of Handicrafts.

2.3 Current Scenario

The Indian toy industry is a major market for both domestic and international players, owing
to low penetration (0.5 per cent) as well as growth in the size of the middle class. India's toy
industry has a meager share of 0.5% of the global market. The Indian toy market, whose size
is estimated at about Rs. 8,000 crore (as of March 2013) and grow at a compound annual
growth rate (CAGR) of 20% by 2015.

Only 20% of the Indian market is served by Indian manufacturers, with the rest being
accounted for by imports mainly from China and Italy, which offer wider variety at lower
prices and attract children of all ages. These imports include fun games, electronic toys, board
games, construction toys, stuffed toys, educational games and toy cars.

The Indian toy industry, which largely consists of small and medium enterprises (SMEs), is
caught in a strange paradox - it recorded double-digit growth over the last five years, and yet
around 40% of Indian toy manufacturing units have closed down. For this situation, the
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Associated Chambers of Commerce and Industry (ASSOCHAM) is used the term "dragon
effect" in which the Indian market is flooded with Chinese toys and Indian toy manufacturers
are being decimated.

Both market segments are growing but the organized market is growing faster at about 35%
per year versus the unorganized market at 15%. This difference is partly explained by the
relative population growth rates at 2.4% per year for the urban areas versus 1.1% for the rural
segment (Lutz Muller, January 2013). The online toy market, represents a mere 5% though
growing rapidly, is unlikely to have a major influence on the overall demand in the next
couple of years.

It is the organized market that attracts large international toy manufacturers such as Mattel,
Hasbro, Disney, LEGO etc. The unorganized segment gets supplies mainly from wholesalers,
who draw their supplies either from domestic manufacturers or Chinese sources. The
unorganized market place is characterized by very low pricing, small sales volume per store,
unconventional accounting and a very high percentage of knock-offs of leading Western
brands such as Lego. A high degree attributable to knock-offs from China sold in both the
organized as well as the unorganized markets. The organized market is characterized by two
leading players- Mattel and Hasbro.

Small toy shops are catering to the masses, while branded ones like Fisher Price, Funskool,
Hamleys, Lego amd Mattel are catering to the middle and high class. However, in the recent
years, the toy market witnessed a steady growth owing to increased urbanization and retail
opportunities, availability of branded toys, enhanced income levels etc. Since the modern
trade and organized players are growing at 15 to 20%, the industry growth hovers between 10
and 15%. Metro-cities like Ahmadabad, Bangalore, Hyderabad and Pune have recorded the
highest growth in sales of toy and emerging as a hub for toy manufacturing. With increased
availability of toys and games in the market and increasing disposable income, the new
emergent pool of customers looks beyond the common toys (those connected with just light,
sound and motion).

Traditionally, the Indian toy industry recorded marginal growth owing to the small scale
operations of the indigenous manufacturers which was characterized by limited innovation,
lower investments in equipment, technology and minimal marketing.

The worst-hit toy clusters are in Allahabad, Delhi, Kanpur, Lucknow and Patna. About 50%
of the toy units based in Delhi-NCR, 35% are based in Maharashtra, and the remaining 15%
are scattered across the country.

While SMEs are being pummelled by Chinese imports within India, made-in-India toys are
offering tough competition to Chinese products in the mid- and high-priced segments in both
domestic and international markets. Industry experts say that major global buyers have slowly
begun looking towards India since the cost of labor is going up in China.

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Another problem is manufacturing capacity. Today Chinese manufacturers are able to

consolidate their production and send it to different customers in a single container in a
particular country, which India is not able to do.

2.4 Major Modern Toy Manufacturing Clusters in India

The modern toy industry in India is a late starter. Till early 1980’s Indian toys were not in a
position to expand in the domestic market substantially. The toy industry in India is
concentrated mainly in the small and cottage sectors, with about 4000 manufacturers in all.
The manufacturing units are clustered around Delhi, Mumbai, and northern state of Punjab,
Uttar Pradesh and Haryana, also some in the Southern State of Tamil Nadu and Karnataka and
in other clusters across India’s central states. They produce a wide variety of items ranging
from plastic and metal toys to electronic items. Dominant players in the toy industry are the
plastic toys. The Indian toy market is presently characterized by limited product innovation
and insignificant expenditure on advertising or brand building. In the recent years some larger
units under the organized sector have come up too. The unorganized/cottage sector products
are usually low priced, their products are mostly sold in small towns and rural areas. These
producers, at the lower price end of the market cater to the demand of lower income group by
providing toys made from cheaper raw material i.e. recycled plastic or tin. At the middle price
range the unorganized sector provides cheaper and crude copies of the toys marketed by the
big firms.

The factory made toy segment is growing rapidly owing to a large, emerging middle class in
the domestic economy. An estimated 100 million children belonging to this middle class
group has considerable buying power.

Major Toy manufacturing centers/clusters and the major categories of products manufactured
are given in table 2.2.

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Table 2.2: Modern Toy Manufacturing Clusters in India and Product Categories

Sl. No. States District Major Product Categories

• Soft, stuffed/ Plush Toys,
• Educational & Sports Toys,
• Educational Games &
Puzzles,
• Game Accessories,
• Plastic Toy Guns,
1. Delhi Delhi • PVC Toys & Dolls,
• Blocks Game Wooden &
Plastic,
• Mechanical windup toys
• Battery operated games,
• Singing & Moving Eyes
Dolls.
• Computer Base Game,
• Video Game,
• Soft Toys,
• Plastic Toys,
2. Maharashtra Mumbai
• Education Building Blocks
• Mechanical Pullback etc
• Science Kits,
• Math Lab Kits,
• Video Game,
3. Gujarat Ahmadabad
• Computer Base Game,
• Wooden Educational Toys &
4. West Bengal Kolkata Games,
• Plastic Toys
• Pre-School Toys,
• Educational Games,
• Jigsaw Puzzles,
5. Uttar Pradesh Noida
• Board Games,
• Math Lab Kits,
• Wooden Toys,
• Toys and Gaming
• Art and Creativity
• Baby rattles
6. Tamil Nadu Chennai
• Blocks and construction sets
• Jewelry making kits
• Dolls
7. Goa • Toys and Gaming
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• Art and Creativity

• Baby rattles
• Blocks and construction sets
• Jewelry making kits
• Dolls

2.4.1 Large International Toy Manufacturers in India

Mattel: Mattel is the world’s largest toy importing company in terms of revenue. The
products it imports mostly from China, include Barbie dolls, Hot Wheels and Matchbox cars,
American Girl dolls, board games, , video game consoles etc. It was founded in 1945. Today,
the Barbie line alone contributes more than 80% of Mattel’s profits. The Mattel Company is a
US $ 30 Billion company out of which their market share in India is around 5%.

Mattel Toys (India) Pvt Ltd retained its leadership position in toys and games as a whole with
its strongest brands, achieved primarily through brands such as Barbie, Hot Wheels and
Fisher-Price, all of which are present in traditional toys and games. Sony India Pvt Ltd was
ranked second overall in 2014, a position achieved through its leadership in video games,
where it is present with its PlayStation range. Despite its size, since the traditional toys and
games category remains relatively underdeveloped.

Funskool: Funskool was set up in the year 1987. Funskool is the joint venture between the
Indian tyre giant MRF and Hasbro Inc., a leading toy company, undoubtedly the largest toy
company in India. Funskool manufacture and export a wide range of toys for their
international partner Hasbro. Hasbro is a world leader in children's and family leisure time
entertainment products and services, including the design, manufacture and marketing of
games and toys ranging from traditional to high-tech. Funskool has two state of the art
manufacturing facilities based at Corlim, Goa (Western India ) and at Ranipet , Tamil Nadu
(Southern India).

The bigger factory at Goa commenced operations in 1988, and employs over 450 personnel,
and as a part of the expansion drive, the factory at Ranipet, started operations in 1999
employing about 200 employees.

2.5 Growth of Indian Toy Industry

Indian toy industry is reeling under severe completion from cheap Chinese products. It is
pulling out all stops to bounce back into children’s reckoning with innovative and better
designed toys. According to Euromonitor Report (2013), action figures and accessories have
shown robust growth of 36% in 2011 within the traditional toys segment.

• Traditional Toys
Traditional Toys with a price range between Rs 100 and Rs 199 accounted for the
majority of sales with 45% share in 2011. Pre-teens between the ages 7 and 12 years
were the largest segment of consumers who constituted 43% of the sales in 2011.

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Licensed toys are becoming a rage among children who generally spend long hours
watching children’s shows and movies, such as ChhotaBheem, Ben10, Beyblade etc.
Euromonitor Report (2013) estimated this segment to grow by 9% annually between
2011 and 2016.

• Video Games
The video games market performed better than its peers. In this segment, online games
are becoming increasingly popular not just among teenagers, but also among adults
aged between 20 and 30, thanks to increasing disposable incomes, internet
connectivity, mobile devices and tablets as well as innovative games coming into the
market. More and more adults are playing video games as a pass-time to alleviate the
increasing work related stress. All these factors will help this segment to clock an
impressive growth rate of 32% during 2011-16.

• Electronic Toys and Games

Research indicates that kids prefer electronic toys with multiple features over
traditional ones. As a result, most of the new launches in this segment are toys with
multiple features. For instance, Think way Toys partnered with My Baby Excels to
launch the ‘Darknight Rises’ toy line in India in 2012.The toy,was a hit among
children, also featured voice recognition, 360 degree flips, pre-recorded dialogues and
much more. Euromonitor Report (2013) foresees a growth of 22% annual growth
between 2011 and 2016 for this segment.

• Ethnic Toys
As time passed the Barbie doll replaced the humble clay doll, while Lego took the
place of simple wooden building blocks. But, Ethnic toys are staging a comeback with
the help of NGOs like Maaya Organic, Bangalore which has helped the revival of
traditional toy making by infusing market research findings into the ancient Indian
craft of wooden and lac-ware toy making. But they are expected to cater to the export
segment rather than mass-market segments. “Green” toy makers that use recycled
environmentally-friendly material are playing the “non-toxic-yet-cost-effective” card
and aspect to draw the attention of quality conscious parents. The toys are expected to
be touted as the next “big thing” in the Indian toy market.

2.5.1 Facts

• The Indian toy industry is estimated to be worth US $850 million of which 10%
constitutes organized market and 90% constitutes unorganized market and growing
15-20% a year.
• Indian parents spend an average of Rs 250-300 on a toy andit is going up. More and
more innovation-driven high-end toys and games from high-priced board games and
play gyms to BeyBlades and remote-controlled planes enter the market.
• 20% of the population is in the age group of 1 to 12 years.

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• Traditional toy sector is a Labour Intensive Industry predominantly based in Small

and Tiny Sector.
• Use of Multi Technology and varied Raw Materials
• Annual growth rate is around 15 to 20%.(TAI Report, 2013)
• Government of India giving impetus to learning through various projects and &
schemes.
• Indian toy industry is estimated at Rs. 8000 crores and until now has generated only
0.5% of the global toy market.
• Workers are mostly from economically and socially weaker sections

2.5.2 Advantage for India

• Growing domestic market and buying capacity

• Liberalized economy
• Low cost manufacturing base
• Advantage of Information Technology & Communication
• Spread of play way education through toys
• Huge demand of toys in teaching process under government schemes like
‘SarvaShikshaAbhiyan’
• World especially western countries looking for alternate manufacturing hub in place of
China.

2.5.3 Major Challenges to Indian Toy Industry

• Weights & Measures Act has been a major cause of inconvenience to the toy industry,
right from manufacturers to the retailers
• There is a big grey area in the Central Excise interpretation under chapter 95.03 &
chapter 95.04.
• Most Indian Manufacturers ensure that they use and make the best quality toys. In all
reports, there are hardly any negative remarks on Indian manufacturers regarding toxic
complaints.
• Being a neglected & extremely small industry, Toy Industry received a step-brotherly
treatment from every department. There is an urgent need to upgrade the technology
so that Toy Industry will have a level playing field to compete with the likes of the
bigger international players like Hansbro, Ravensberger, Lego, etc.
• Lack of International market intelligence.
• The C-form collection & submission is a tedious task. With most MSME
manufacturers being family run business, the compliance of this law takes precious
time and energy. This, followed by delayed assessments, orders, non-compliance
penal charges, etc., gives rise to confrontations and legal/ lobbying practices.

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2.5.4 Export Prospects

• Due to the merger of Hong Kong with China, American / European Toy
Manufacturers / Traders are looking for alternate manufacturing base in South East
Asia, and this is the opportune time for India to attract them.
• The cost of production in China is rising faster than in India. They are also facing
acute labour problems and escalation of wages.
• It is advantage for India and it is the right time to take full advantage of the situation.

2.6 Future of Toy Industry in India

Over the years Indian middle class has emerged as a major force to reckon with in the
consumerist world arena. The purchasing power of Indian middle class has been considered
equivalent to the entire European market. Considering the retail boom and the changing
consumption habits of the middle class which favor use of toys as a medium for entertainment
and education, the toy industry in India is poised for a major upward growth and for a brighter
future.

Though the toy industry is mainly driven by designs and marketability, technology remains
the backbone for converting the designs into viable and marketable products. Outright
purchase of technology or licensing arrangements for toy industry does not appear to be
viable. The internationally available technologies are very costly and are beyond the reach of
toy manufacturers from the SMEs. Under the WTO scenario, institutional back up can help
solving issues of costly technologies, obsolete designs, market intelligence and better tooling.
Method of reverse engineering will not be available hence forth to the toy manufacturing
companies. As a result, these companies may have to invest in their own design and
development. Modern prototype development techniques, better tool room facilities would be
more useful to the toy units. The industry needs to be sensitized and upgraded regularly based
on WTO provisions and related opportunities. The toy industry has to develop a culture of
innovations and market intelligence.

Setting up of a big toy units with a number of peripheral smaller toy component
manufacturers can be a good model for development of Indian toy industry. The smaller
ancillary units may feed components to larger companies, as per design and advice of the
larger company. The central company can source costly technologies from overseas in a WTO
compatible environment. This will lead to multiple trades in technology wherein the central
company seeks technology from a technology provider in the developed country and also
provides technology in parts to its vendors/supplier companies.

After the implementation of the US$2.2 million joint project by the National Programme of
Development of Toy Industry by the Ministry of Small-Scale Industries, the Toy Association
of India (TAI) and the UN Industrial Development Organization (UNIDO), there has been
considerable improvement in the quality and design of products, and increase in toy exports.

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CHAPTER 3

PRODUCTIVITY AND GROWTH OF REGISTERED

TOY MANUFACTURING SECTOR

3.1 Introduction

This chapter analyses productivity and growth of organized (registered) toy manufacturing
sector in India. The organized factory sector occupies an important position in terms of toy
production in India 1. Though the numbers of registered manufacturing units are less in
number as compared to unorganized sector, its importance cannot be underestimated. The
registered factory sector consists of both small scale and large-scale enterprises.

Major characteristics of the organized factory sector are available from Annual Survey of
Industries (ASI) under three digit industrial classifications i.e., 324 - Manufacture of games
and toys. Therefore, the developments in the organized factory sector can be measured on a
time series data. Considering these facts an attempt has been made in this chapter to analyze
the productivity performance of the registered toy industry (organized factory sector) in India
during 2009-10 to 2013-14.

The most significant determinant of competitiveness of any industry is its productivity levels
and growth. One important determinant could be its labor productivity. However, besides
labor and capital productivity, total factor productivity also critically influence the
competitiveness of the sector.

3.2 Key Features of Registered Toy Manufacturing

A brief analysis of the data on toy sector (registered manufacturing) at the All India level
based on ASI data reported decrease for eight out of seventeen variables considered during
the study period 2009-10 to 2013-14 (Table 3.1). Increase in data have been reported for
outstanding loan, rent paid, Invested Capital, Rent paid, interest paid, interest received, Total
Output, Total Input, Wages and Emoluments during 2009-10 to 2013-14. Highest increase
during the period was reported for outstanding loan as it increased more than 18 times.

It may be seen from table 3.1 that number of persons engaged in 91 toy manufacturing units
decreased from 2936 in 2009-10 to 2162 in 90 toy manufacturing units by 2013-14. It may be
noticed that the number of registered factories stagnated around 90 manufacturing units
during the study period.

1
Factory is one that is registered under sections 2m (i) and 2m (ii) of the Factories Act, 1948. The sections 2m (i) and
2m (ii) refers to any premises including the precincts thereof (a) whereon ten or more workers are working, or were
working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried
on with the aid of power, or is ordinarily so carried on; or (b) whereon twenty or more workers are working or were
working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried
on without the aid of power, or is ordinarily so carried on.
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Table 3.1: Overview of Toy Manufacturing: Registered factory Sector

(Value in Rs. Lakhs at constant price, others in Numbers)

Sl.
Variables 2009-10 2010-11 2011-12 2012-13 2013-14
No.

1 Number of factories 91 98 102 145 90

Factories in operation
2 84 82 66 90 52
(no.)

No. of Persons
3 2936 3078 2171 2665 2162
Engaged (no.)

4 Gross Value Added 11974 11486 7751 7322 6364

5 Fixed capital 17044 19814 14718 28391 13165

6 Outstanding Loan 8078 94437 102494 118540 153444

7 Invested Capital 33151 32134 44566 52290 34465

Rent Paid for Fixed
8 157 144 201 257 204
Assets
9 Interest Paid 3050 1577 590 14827 11008
Rent received for
10 89 34 72 74 16
Fixed Assets
11 Interest received 48 85 88 67 145

12 Total Output 35954 45886 51634 68756 36341

13 Total Inputs 23980 34400 43883 61434 29977

14 Income 7133 7974 5306 ‐9720 ‐6419
15 Profit 3879 3702 1782 ‐14333 ‐9927
16 Wages to Workers 1286 1562 1197 1459 1589

17 Total Emoluments 2829 3784 3212 4197 3108

Source: Compiled from Annual Survey of Industries (ASI), Summary results of Factory Sector, CSO (various
years)
Note: As per NIC 2008 classification, Manufacture of Games & Toys has been put under a separate code ‘324’
so it is not comparable to the previous NIC classifications.

3.3 Productivity Estimation for Toy Manufacturing Sector

Partial productivity has been estimated for the major inputs namely Labour and Capital for the
Toy Manufacturing Sector during the study period 2009-10 to 2013-14 and the estimations are

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reported in Table 3.2. Besides partial productivity estimations, capital intensity (capital
investment per worker) has also been estimated for the toy manufacturing sector during 2009-
10 to 2013-14 in Table 3.2. The methodology adopted for the estimation of Partial (labor &
capital) and Total Factor Productivity Growth (TFPG) are given in Annexure III. Labor input
is considered as the total number of persons engaged in the production process. Capital
Productivity has been estimated as Gross Value Added (GVA) with respect to every rupee
Invested.

Capital Productivity reported considerable reduction during the study period as it declined
from Rs. 0.70 in 2009-10 to Rs. 0.26 by 2012-13. However, there is a turnaround reported
during 2013-14 as the capital productivity increased to Rs.0.48.

In the case of Labour productivity there is a consistant decline reported as it decelined from
Rs. 4.07 lakhs in 2009-10 to Rs. 2.74 lakhs in 2012-13. Similar to Capital Productivity,
Labour Proudctivity also reported an increase during 2013-14 as it increased to Rs.2.94 lakhs
per worker.

Capital intensity (capital invested per worker) reported considerable increase during the study
period as it increased from Rs.5.81 lakh in 2009-10 to Rs.10.65 lakhs by 2012-13. However,
during the last year of the study 2013-14, a sudden dip in capital intensity has been observed
as it declined to Rs.6.08 lakhs for capital intensity.

It may be seen that technology plays an important role in the toy manufacturing process
during the study period. More and more capital investment has been taking place in the
registered toy manufacturing sector which lead to substantial decline in capital productivity.

Table 3.2: Labor Productivity, Capital Productivity and Capital Intensity Estimations for
Registered Toy Manufacturing Sector

Capital
Capital Labor
Intensity
Productivity Productivity
Year (Invested
(GVA per Rupee (GVA per
Capital per
invested) (Rs.) worker) (Rs.)
worker) (Rs)
2009-10 0.70 407834 580518
2010-11 0.58 373164 643730
2011-12 0.53 357024 677936
2012-13 0.26 274747 1065328
2013-14 0.48 294357 608927
Source: Estimated from ASI-Summary results of factory sector, CSO according to
NIC 2008 classification.
Note: Productivity has been estimated as (GVA/Price Index)/Factor input.

Further, year on year growth rate estimations for capital, labour and total factor productivity
for the registered Toy manufacturing has been reported in Table 3.3. It may be noted that
annual growth rate is negative for both lobor and total factor productivity. Average of capital
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productivity growth estimated for all the five years reported positive growth rate of 2.44%.
On the other hand, average of labour productivity growth rate reported at -7.18%. While,
total factor productivity growth rate (TFPG) reported negative growth rate at -8.98%. The
abnormal fluctuations reported during the five year period under study shows that the sector is
going through intense global competition and loosing out in this fight.

There is an urgent need for policy interventions as the number of registered toy units have
remained static and productivity levels are declining and the outstanding loan increased from
Rs. 6846 lakhs in 2009-10 to Rs. 116245 lakhs by 2013-14. This indicates an alarming
scenario with respect to the growth of toy sector in the country. The higher capital investment
in turn did not contribute towards labor and capital productivity growth rather contributed
towards negative total factor productivity growth. Though technology up gradation is
imperative in the globalised setting, it should translate into higher labor and capital
productivity levels for making the Toy Sector sustainable.

Table 3.3: Labor, Capital and Total Factor Productivity Growth of Toy Manufacturing Sector

GVA Capital Labor Total Factor

Year Growth Productivity Productivity Productivity
Growth Growth Growth
2009-10 -- -- --
2010-11 -4.08 -17.49 -8.50 5.87
2011-12 -32.52 -9.15 -4.33 -27.33
2012-13 -5.53 -51.03 -23.05 21.11
2013-14 -13.08 87.44 7.14 -35.56
Average for the
years 2008-09 to
2013-14 -13.80 2.44 -7.18 -8.98
Source: Computed from Annual Survey of Industries (ASI), Summary results of Factory Sector, CSO

3.4 Conclusion

From the above analysis, it may be concluded that labour, capital and total factor productivity
growth estimations indicate that technology played a significant role in the productivity
growth of toy sector in India during 2009-10 to 2013-14 period. Increased level of capital
investment is taking place in the registered toy manufacturing sector as compared to earlier
years, which is contributing to higher levels of outstanding loan per unit without
commensurate value added growth or productivity growth. Though technology up gradation is
vital to make the toy sector more productive and competitive in the globalised setting, it is
also important to consider the return on investment for making the sector sustainable. Due to
intense global competition particularly from China, Gross Value Added, profits, number of
workers etc., have fallen drastically during the study period along with lower productivity
levels.

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CHAPTER 4

GLOBAL TOY MARKET AND INDIA

4.1 Introduction

Global toys and games market is mainly influenced by large global enterprises, which enjoy
considerable economies of scale, as a result reduce their costs and enhance profit margins.
Toy market is characterized by wide-ranging product differentiation that serves to weaken the
degree of rivalry amongst manufacturing units to a great extent, and also deteriorate buyer
power. Due to high degree of product differentiation, toys and games market requires infinite
inputs, some of which are technology intensive, like, electronic components, processors, etc.
In this chapter we analyze the global toy market and India’s comparative position with respect
to export and import of various toy products in the recent years. We also discuss the toy sector
in China and trends in India’s trade with China in terms of different toy products.

4.2 Global Toy Market

In 2014, total sales of worldwide toy industry have been estimated at US $85 billion and are
expected to reach US $100 billion by the end of 2015. Out of this $85 billion, 20 billion US $
are attributable to the U.S. market which is the largest consumer of toy market (Figure 4.1).
The toy industry sales reported an increase of 7% during the year 2015. In recent years, the
market has been influenced by varying consumer tastes, with children opting for more
sophisticated video games and electronic toys. This means toys and games manufacturers
need to bring out new products on a regular basis, and focus on innovation and technological
advancements.
Some of the major global manufacturers are: Mattel Inc, Bandai Namco, Hasbro Inc, Jacks
Pacific, Leap Frog, Lego Inc, MGA Entertainment, Spin Master, Takara Tommy Co Ltd and
V Tech. Top 5 major brands in the world are presented in Table 4.1.

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Table 4.1: Top 5 Companies by Sales of Toys

Rank India China EU US World

Guangdong
Mattel
1 LEGO Alpha Mattel Inc Mattel Inc
Inc
Animation
Toyroyal LEGO
2 Nintendo Hasbro Inc Hasbro Inc
Co Ltd Group
Lego Toys Hasbro LEGO
3 Funskool LEGO Group
Ltd Inc Group
BANDAI
Hot Private Spin Master
4 Mattel Inc NAMCO
Wheels Label Ltd
Group
Shanghai
Simba- Takara
Yaoji Hallmark
5 Disney Dickie Tomy Co
Playing Cards Inc
Group Ltd
Cards
Source: Study on the Competitiveness of the Toy Industry (2013) by ECSIP Consortium.
For India the information is extracted from this website-
http://www.tech5.co.in/top-5-best-toys-brands-in-india/

Further, expected growth rate in major regions for the period from 2013-2016 is given in
Table 4.2. Among these regions, China shows a significant growth from 15% in 2013 to 17%
in 2016. This is due to the big market size and increasing urbanization in the country.

Table 4.2: Expected Growth Rates in Major Regions, 2013-2016 (%)

Country 2013 2014 2015 2016

China 15.48 15.83 16.11 17.14
US 3.74 3.48 1.90 2.44
EU 3.99 4.16 4.02 3.98
Others 6.94 6.95 7.31 7.24

Ten major toy markets in the world along with the country’s share in the world toy market,
spending per kid, kid population and market for 15 years old children are given in Table 4.3.
These top ten countries represent two-third of the total toy market. The United States accounts
for the highest share of the global toys market, but represents approximately two percent of
the world’s children. Among these ten nations, India reported the highest kid population at
352.8 million. In the case of spending per kid, Australia reported the highest spending at US $
501.6 (rank first) while it is only at US $ 6 in India and ranked at 10 position in the selected
countries (Figure 4.3). This indicates that there is tremendous market potential for toys in
India.

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Table 4.3: World Toy Market -Top 10 Countries in the World, 2010

Sl. Country Country Share in Spending Kid Market to

No. World Toy per Kid ($) Population 15 years
Market (%) in 2014 (Million) old (%)
1 United States 26.3 319 62.4 19
2 Japan 7.5 295 16.9 16
3 China 6.7 24.4 238.3 2
4 United Kingdom 5.4 380 10.8 12
5 France 4.9 328 12.0 10
6 Germany 4.0 255.6 11.0 19
7 Brazil 3.9 59 53.3 4
8 Australia 2.8 501.6 4.0 17
9 India 2.7 6.4 352.8 0
10 Canada 2.5 326 5.4 17
Source: International Council of Toy Industries.

Figure 4.2: Per Capita Expenditure on Toys in Selected Countries, 2014

Australia 502
United… 380
France 328
Canada 326
United… 319
Japan 295
Germany 256
Brazil 59
China 24
India 6

0 200 400 600

Amount per child (US $)

Source: International Council of Toy Industries, 2014

The process of manufacturing and marketing of toys is shown through a diagram in the report
prepared by European Consortium for Sustainable Industry Policy (ECSIP) on
Competitiveness of the Toy Industry is given in Figure 4.1.

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Figure 4.1: Toy Industry Value Chain

Source: Study on the Competitiveness of the Toy Industry, 2014 by ECSIP Consortium

4.2. India’s Toy Trade with the World

Toys and games in India witnessed moderate growth in 2015 after a slowdown in 2014 and
this was mainly driven by the growth in video games. Traditional toys witnessed slow to
moderate growth in 2015 due to decreasing demand and an increase in the number of
consumers shifting from traditional toys to video games. However, action figures and
accessories, and construction witnessed strong growth within traditional toys due to
increasing demand for licensed products and in-store advertising by brands such as Lego. The
Indian Toy Industry is expected to grow at CAGR of 20% and would be valued at Rs. 248.83
billion by the year 2020. Market line estimates specialist store sales accounted for 60% of
overall industry revenues at almost $ 1.5 billion.
The Indian industry is characterized by-
• Fragmentation
• Small scale of domestic producers
• Lack of innovation
• Lack of resources to invest in equipment, technology and advertising
Smart Research Insights predicts growth will become stronger due to urbanization, expanding
consumer base and rising income levels. The Indian toy industry is a mix of domestic and
international players. These companies have contributed to the industry in one way or another
and are trying their best to revolutionize the industry to place themselves in one of the
foremost toy industries globally. Top players in the Indian toy Industry include Hamleys,
Funskool India, Hanaug Toys & Textiles, Mattel Toys, Pegasus Toy-Kraft, Zephyr, Chalk and
Chuckles, Ok Play India, and many more.

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In this section, India’s export and import of major toy products to the rest of the world has
been analyzed during 203-04 to 2015-16 with special reference to China. Export
competitiveness has been estimated from the trade ratio i.e. export as a ratio of import. It is
worth noting that during 2003-04 to 2015-16 period exports from India to World markets
have increased by almost 5 times whereas imports have increased by more than 15 times.
In can be seen from Table 4.4 that the exports of Toys, Games and Sports requisites, Parts
and Accessories thereof (HS Code 95) rose from Rs. 41,464 lakhs in 2003-04 to Rs. 1,89,206
lakhs in 2015-16, while imports increased from Rs. 22,870 lakhs to Rs. 3,53,662 lakhs during
the same period. As a result of fast increasing imports, export/import ratio fell sharply from a
highly favorable level of 1.81 in 2003-04 to a very low level of 0.53 by 2015-16. Since 2006-
07 import exceeded exports, resulting in the lowest trade ratio during the whole decade at 0.45
by 2012-13. Declining trade ratio indicates that India’s global competitiveness with respect to
toy products are going down year after year. However, marginal improvement in the trade
ratio has been reported from 2013-14 onwards.

Table 4.4: International Trade in Toys, Games and Sports

requisites, Parts and Accessories thereof between India and the
rest of the World [HS Code : 95]
Export Import Trade Ratio
Year
(Rs. Lakhs) (Rs. Lakhs) (Export/ Import)
2003-04 41,464 22,870 1.81
2004-05 45,878 29,744 1.54
2005-06 58,646 50,563 1.15
2006-07 57,292 71,162 0.80
2007-08 53,740 70,167 0.76
2008-09 64,192 98,798 0.64
2009-10 63,351 98,997 0.63
2010-11 74,626 1,49,756 0.49
2011-12 1,00,060 2,03,100 0.49
2012-13 1,17,058 2,58,184 0.45
2013-14 1,56,105 2,87,497 0.54
2014-15 1,78,620 3,05,413 0.58
2015-16 1,89,206 3,53,662 053
Source: Ministry of Commerce & Industry, Department of Commerce, GOI

Table 4.5 exhibits a consistently declining trend in export-import ratio for Other Toys such as
puzzles, small and smaller recreational models (HS Code 9503) during the decade 2002-03 to
2015-16. Exports increased from Rs. 2,515 lakhs in 2002-03 to Rs. 42,925 lakhs by 2015-16
i.e. reporting almost 17 times increase. There is sudden increase in exports of other toys from
Rs. 25,055 lakhs in 2014-15 to Rs. 42,925 lakhs in 2015-16. In the case of imports, it may be
noted that it increased from Rs. 7,217 lakhs in 2002-03 to Rs. 1,98,453 lakhs in 2015-16 i.e.
an increase of more than 25 times. Trade ratio plummeted from 1.96 to 0.22 during the period
2002-03 to 2015-16 indicating the alarming levels at which the imports are increasing with
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respect to this toy product segment and the decline in India’s trade competitiveness. In the
year 2013-14 onwards we notice an improvement in trade ratio due to significant increase in
exports.

Table 4.5: Trade in Other Toys; Reduced Size ("SCALE")

Models and Similar Recreational Models, Working/NT; Puzzles
of All Kinds from India to World Market (HS Code: 9503)
Export Import Trade Ratio
Year
(Rs. Lakhs) (Rs. Lakhs) (Export/Import)
2002-03 2,515.45 7,217.35 0.35
2003-04 2,384.01 9,626.25 0.25
2004-05 3,162.55 12,537.00 0.25
2005-06 4,065.82 19,277.66 0.21
2006-07 4,305.96 25,005.06 0.17
2007-08 4,687.57 31,103.71 0.15
2008-09 5,767.00 36,257.00 0.16
2009-10 5,818.00 33,358.00 0.17
2010-11 6,756.00 64,550.00 0.10
2011-12 9,077.00 93,901.00 0.10
2012-13 14,227.00 1,24,083.00 0.11
2013-14 22,397.00 1,55,606.00 0.14
2014-15 25,055.82 1,68,870.00 0.15
2015-16 42,925.72 1,98,453.32 0.22
Source: Ministry of Commerce & Industry, Department of Commerce, GoI

4.3. India’s Toy Trade with China

Though China is highly competitive in toy manufacturing as compared to India, still some
exports are taking place from India to China. From Table 4.6, it is observed that India’s
export of toys, games and sports requisites, parts and accessories thereof to China increased
from Rs 259 lakhs to Rs 3,781 lakhs during 2003-04 to 2015-16 periods. However, it accounts
only 2% of India’s total volume of toy export to the world. In the case of imports of toy
products from China, we notice considerable increase during the period. Moreover, the import
of toy items from China is about 80.86% of total toy products imported from the rest of the
world, by India, during 2015-16.

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Table 4.6: India’s Trade in Toys, Games and Sports Requisites; Parts And
Accessories thereof with China [HS Code: 95] (Rs Lakhs)
Trade
Total
Total Expor Import Ratio
India’s Import India’s
Export t to from (Export/
Export by Import
Year from China China Import)
to India from
India to (% to (% to of India
China from China
World Total) Total) with
World
China
2003-04 41,463 259 0.63 22,869 11,715 51.23 0.022
2004-05 45,878 152 0.33 29,743 16,426 55.23 0.009
2005-06 58,645 138 0.24 50,562 27,287 53.97 0.005
2006-07 57,292 316 0.55 71,161 43,402 60.99 0.007
2007-08 53,740 232 0.43 70,167 45,081 64.25 0.005
2008-09 64,191 145 0.22 98,797 54,453 55.11 0.002
2009-10 63,351 216 0.34 98,997 68,514 69.20 0.003
2010-11 74,626 276 0.36 149,756 1,08,596 72.51 0.002
2011-12 100,060 745 0.74 203,200 1,55,368 76.46 0.004
2012-13 117,058 677 0.22 258,184 1,91,839 74.30 0.003
2013-14 156,105 605 0.34 287,497 2,21,781 77.14 0.002
2014-15 1,78,619 490 0.27 3,05,413 2,52,519 82.68 0.001
2015-16 1,89,206 3,781 2.00 3,53,663 2,85,985 80.86 0.013
Source: Ministry of Commerce & Industry, Department of Commerce, GoI

Trade ratio also exhibits a dismal picture as the export competitiveness has considerably
eroded during the study period as India became a net importer. It can be seen from table 4.7
that since 2008-09, India’s Trade ratio has fallen drastically by almost 60% and India has not
been able to improve this ratio.

Furthermore, compound annual growth rate of India’s Exports and Imports of toys to and
from world and China for the period of 2003-04 to 2015-16 is reported in Table 4.7. It is
worth noting that total import by India from world has grown at a CAGR of 25.64% whereas
the growth rate of total exports from India to world was growing only at 13.49% per annum.
Moreover, there is a big difference between CAGR of India’s export to China and Imports
from China. Export growth rate was 25% against import growth rate of 30.51%.

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Table 4.7: Compound Annual Growth Rate (CAGR) of India’s Trade

in Toys, Games and Sports Requisites; Parts and Accessories thereof
with China [HS Code: 95]
Particulars CAGR (%)
Total export from India to World 13.49
Total import by India from World 25.64
India’s Export to China 25.03
India’s Import from China 30.51
Source: Consultancy’s Computation.
Table 4.8 reports India’s trade with China and rest of the world with respect to other toys,
reduced size (scale) models and similar recreational models, working or not; puzzles of all
kinds. It may be noted that India’s exports to China comprises of only a negligible till 2014-
15. However, a sudden spurt in export to China reported in 2015-16 and it recorded 7.64% of
the total export. While the total export to world increased more than 19 times during the study
period, imports increased more than 20 times. Import of this category of toy product from
China constitutes nearly 95% of total imports by India. Though the trade ratio is unfavorable
to India during the entire study period, considerable increase in export to China has been
reported during 2014-15.

Table 4.8: India’s Trade in Other Toys; reduced-size ("scale") models & smaller
recreational models, working/NT; puzzles of all kinds to China [HS Code: 9503]
(Rs. Lakh)
Total Export Import
Total Trade Ratio
export Export to Import from
import by (Export/Import)
Year from to China from China
India from of India with
India to China (% to China (% to
World China
World total) total)
2003-04 2,384.01 1.92 0.08 9,626.25 7,663.14 79.61 0.0003
2004-05 3,162.55 10.16 0.32 12,537.71 10,358.93 82.62 0.0010
2005-06 4,065.82 0.33 0.01 19,277.66 16,930.30 87.82 0.0002
2006-07 4,305.96 75.59 1.76 25,005.06 22,807.97 91.21 0.0033
2007-08 4,687.57 2.04 0.04 31,103.71 27,830.51 89.48 0.0001
2008-09 5,767.00 10 0.17 36,257.00 30,572.00 84.32 0.0003
2009-10 5,818.00 3 0.05 33,358.00 29,619.00 88.79 0.0001
2010-11 6,756.00 25 0.38 64,550.00 57,476.00 89.04 0.0004
2011-12 9,077.00 162 1.79 93,401.00 86,900.00 93.04 0.0019
2012-13 14,227.00 340 2.39 1,24,083.00 1,16,256.00 91.27 0.0029
2013-14 22,396.00 9.65 0.04 1,55,606.00 1,46,525.00 94.16 0.0001
2014-15 25,055.80 122.77 0.49 1,68,870.55 1,59,216.13 94.28 0.0008
2015-16 42,925.71 3,280.13 7.64 1,98,453.31 1,87,917.81 94.69 0.0175

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Since India is a net importer with respect to both China and Rest of the World, there is hardly
any export competitiveness for India in this product category.

It is clear from Table 4.9 that compound annual growth rate in India’s Trade in other toys;
reduced size (scale) models and smaller recreational models, puzzles of all kinds with World
was 27.24% for the period from 2003-04 to 2015-16. As far as exports of India to China is
concerned, it is recorded 85.94% growth per annum which is much higher than the export
from India to World. It is also worth noting that import from China to India is at 30.56%
while it is accounted at 28.68% for imports by India from world.

It can be concluded that India’s import from China for both product category i.e. Toys, Games
and Sports Requisites; Parts and Accessories (HS Code: 95) and other Toys; reduced-size (scale)
models & smaller recreational models, working/NT; puzzles of all kinds (HS Code: 9503) is recorded
almost same growth rate (30%) during the period from 2003-04 to 2015-16. But India’s
export to China of other Toys; reduced-size (scale) models & smaller recreational models,
working/NT; puzzles of all kinds (HS Code: 9503) is favorable and accounted at 85.94% whereas
it is 25% for the category of Toys, Games and Sports Requisites.

Table 4.9: Compound Annual Growth Rate (CAGR) of

India’s Trade in Other Toys; reduced-size ("scale")
models & smaller recreational models, working/NT;
puzzles of all kinds to China [HS Code: 9503]
Particulars CAGR (%)
Total export from India to World 27.24
Total import by India from World 28.68
India’s Export to China 85.94
India’s Import from China 30.56
Source: Consultancy’s Computation.

4.3.1. Toy Industry in India vis a vis China

A study by ASSOCHAM (2013) reveals that only 20% of the Indian market is served by
Indian manufacturers and the rest by import of toys from different countries mainly from
China and Italy. India’s Toy Industry has a meagre share of 0.51% as compared to China’s
share of more than 45% of the world’s toy market. China’s unbranded, cheap toy products
have started flooding Indian toy market. Unbranded toys do not adhere to guidelines, such as
weight and measures which is mandatory for indigenous toy manufacturing. Many do not
print the addresses of manufacturers/ importers, the maximum retail price (MRP) or
manufactured date. The inexpensive Chinese toys have replaced the branded Indian toys. It
has been estimated that almost 80% of the toy market has been taken over by the Chinese
toys.

The Chinese are offering toys at very low prices with large varieties to choose from. They
look attractive and cheap, hence, within the reach of common people. Chinese counter parts
are selling simple toys at 20-25% cheaper than Indian manufacturer. As a result although the
Indian toy market is worth over Rs 10,000 crores, yet the domestic industry is contributing

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only 20%. The remaining demand is met by Chinese imports. Toy industry contributes
significantly to employment levels in China with 7,287 businesses operating, 12,388
establishments and employing 635,299 people in 2013.

4.4. Conclusion

Market growth is fuelled by video, console and computer games. The industry has been
benefitting from a growing adult consumer base which is taking a greater interest in games as
a popular leisure pursuit. Small children are no longer considered the industry’s main target
demographic. Industry players are focusing their marketing efforts on older children and
adults rather than the traditional small children sector.

In the case of Europe, the following factors affect the import of products, especially from
China:
• Regulatory – Toys safety standards are strict and many companies find it easier to
produce toys in EU as that reduces cost of quality assurance
• Cost competitiveness – When it comes to manufacturing of traditional toys,
production in EU is more cost competitive than Chinese imports.
• Developed countries are ageing today with more or less stable number of children in
the EU and the US
• The one child policy has been recently relaxed in China – Currently, demand is
influenced by an increase in purchasing power of parents and teenagers.
• Innovation and Research and Development:
 Shorter life cycle of toys – The key to remain ahead of the curve would be to
learn more from consumer research and introduction of novelties
 As a category, traditional toys face stiff competition from new ICT products
that it would not just be video games and consoles, but even products like
smart phones, tablets and other entertainment products compete for the
preference and spending of children in mature and emerging markets.
Electronic toys, such as applications for tablets are becoming direct and cheap
substitutes for pre-school toys.

With the lowering tariff barriers, melting of international trade boundaries, the domestic
market is now open and the Indian industry is facing the challenges from the domestic
distributors and multinational competitors who imports cheaper products mainly from China.
Only 20% of the Indian market is served by Indian toy manufacturers while the rest by import
of toys from different countries mainly from China and Italy.

Although the toy sector has primarily become a trader’s economy rather than a manufacturing
one, there has been double digit growth over the last five years. As a result of fast increasing
imports, the export/import ratio fell sharply from a level of 0.64 in 2008-09 to a low level of
0.53 in 2015-16. Since imports exceeded exports, resulting in the lowering trade ratio in the
decade, this declining ratio indicates that India’s global competitiveness with respect to toy
products are going down year after year.

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The concept of ‘edutainment’ toys has dramatically changed the toy market. Toys no longer
just fulfill the entertainment requirements of a child, but also cater to the growing needs of
skill development of children. The inexpensive Chinese toys have replaced the branded Indian
toys. It has been estimated that almost 80% of the toy market has been taken over by the
Chinese toys. In recent years, the market has been influenced by changing consumer tastes,
with children opting for more sophisticated video games and electronic toys. Children are also
becoming increasingly accustomed to changing toys more frequently. Thus toy and game
manufacturers are required to produce new products on a regular basis, and focus on
innovation and technological advancements.

While, China is the world’s biggest toy producer and exporter, taking a two-third share of the
international market. Research and expert interviews show that this big difference between the
exports of India and China is not only due to the factors mentioned above but also because
Chinese manufacturers use network clustering to reduce supply chain costs. On the other
hand, India has a scattered industrial set up due to the differential tax incentives offered by
various State Governments. Moreover according to Experts, cost of freight per container from
Guangzhou to Mumbai is less than cost of freight per container from Mumbai to Delhi.

In China, export houses help small and medium manufacturers drive innovation and add
variety to the product line and there is absence of this kind of collaboration in India. With this
intention, Indian toy makers need more direction, similar to SMEs working with the
automobile sector where a product brief moves from Japan to India, and then to the vendor,
who passes it on to SMEs.

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CHAPTER 5

TOY INDUSTRY IN CHINA

5.1 Background

History of modern Chinese toy industry dates back to early 1900s. During the last decade and
half, the Chinese toy industry has developed substantially to become the world leader in
export of toys. Toys in the Chinese market can be classified broadly into electronic,
mechanical, plastic and wooden toys. In addition to traditional toys models, licensed toys
(movie spin-offs, cartoon characters, etc.,), dolls, high-tech toys, educational toys, internet-
compatible toys and toys for adults’ recreation and entertainment have continued to dominate
the market.

5.2 Domestic Toy Market

According to estimates by London based market research company Euromonitor, the total
retail sales of toys and games in China have increased from Chinese Currency Yuan Rmb71.7
billion in 2010 to Rmb192.3 billion in 2015, registering an average annual growth rate of
21.8%. Further, the toy market is expected to reach more than Rmb300billion by 2019.
According to the research data, the average amount spent per child (under the age of 16) on
toys is less than US$30 in China while in the United Kingdom it is US $380 followed by
United States with US $ 319. According to Study on the Competitiveness of the Toy Industry,
2014 by ECSIP Consortium, an estimated 128,000 people are engaged in traditional toy
manufacturing in China.

As urban dwellers’ income increases and quality of life improves, their demands for toys are
beginning to change. There is a shift away from traditional, battery-operated, construction sets
and decorative toys to pioneering electronic toys, intelligent toys as well as upmarket plush
toys and decorative cloth toys.

The toy factories are an important part of the economic boom that has brought many out of
poverty in China. Chinese manufacturers have been innovative and specialize in novelty
items.

There are around 226 million children under the age of 14 on the Chinese mainland. The
biggest driver for toy demand comes from the policy change for married couples to have two
children. The National Health and Family Planning Commission predict that the number of
newborns will climb to between 17.5 million and 21 million annually for the next five years.
Besides, in view of the stable economic growth of China, the prospect of the toy market is
positive.

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5.3 Drivers in China’s Toy Industry

Major categories of toys which raise demand of toy industries in the country are as follows:

• Electronic toys: High-tech Interactive, electronic toys with relatively high technology
content have appeared as mainstream items among toys. In addition, educational toys
are also main drivers for growth. It helps in children’s imagination and creativity and
enhances their hand management skills. Toys for both learning and fun are well-
received by children and parents alike.

• Plush toys: Plush toys are those characters which play role in novel and exclusive
designs especially for popular TV drama and animation characters. Now-a-days
electronic toys integrates with plush toys has become the most recent trend.

• Educational toys: Like jigsaw puzzles, DIY toys and 3D construction sets are
becoming the latest craze among parents and children. These toys are marked by
several common characteristics: innovative design, highly interactive and carrying
high technology content.

• Animation and related spin-offs: According to the Forward Industry Research

Institute, the animation market in China is estimated to top Rmb38 billion in 2015. It
accounts the highest share in toys manufacturing. In China, toy-animation crossover
has yet to mature as a profit-generating business model, and most enterprises in the
animation and related spin-off sectors still rely on animation characters in the US and
Japan in their production.

• Homemade toys and handicrafts: It has captured a wide audience on the mainland.
Working on handicrafts during leisure time can help one wind down, and counter
cross stitching, for example, has caught on as a popular home handicraft.

• Toys for adults’ recreation and entertainment: The market spells enormous
potential, but supply is limited. The market remains largely untapped. According to a
market survey conducted by the Social Survey Institute of China (SSIC) in 2010,
companies specialized in making adult toys were already in operation in the US a long
time ago, and over 40% of these companies’ toys are designed for adults. In China, on
the other hand, the toy industry is still much confined to meeting children’s demands,
and adult toys can hardly be found on the market. 62% of the respondents expressed
that they would consider buying toys if they are of good quality and met their needs.

Different adult consumer groups have different demands for adult toys. While, 34% of the
young people surveyed indicated a preference for more complex, smart toys calling on their
ability to think and explore as well as toys made for decorative and appreciation purposes;
29% of the middle-aged respondents stated their penchant for recreational toys and toys
incorporating light exercises. As opposed to adult males’ preferences, 27% of the adult

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females interviewed expressed the desire for decorative items for the home that double as
handheld toys.

5.4 The China’s Toy Shoppers Survey

Purchasing Behavior Survey published by the Hong Kong Trade Development Council
(HKTDC) in 2014 reported the following findings:

• Among the parents surveyed, 93% point out that “I hope my child can have a pleasant
and happy childhood; I will continue to buy toys to satisfy my child’s demand for
toys”. To children at an older age (6-14), parents would normally give toys as a reward
for the efforts they make.

• Already, children starting from age 3 have clarity on what type of toy they want and
would ask their parents for it. As the children grow older, their influence on buying
decision becomes stronger.

• Majority of children (73%) obtain information on toys from their friends and peer
group. The proportion of children, aged 9-14, who obtain information on toys from the
internet and from electronic games is considerably higher than that of children in other
age groups.

• Parents generally attach utmost importance to safety (66%) and style/exterior design
(55%).

• It has been observed that girls across different age groups like plush toys and dolls,
while boys like remote-control/electric toys.

• The average annual frequency of toy purchase made by parents declined from 10.5
times in 2010 to 8.8 times in 2014, whereas the average annual total spending on toys
climbed from Rmb799 in 2010 to Rmb1069 in 2014.

• Online shopping has emerged as a new trend in the mainland Chaina. According to the
2010 survey, only 14% of the surveyed parents indicated that they had bought toys
online in the preceding year. However, the 2014 survey reports that this proportion has
risen to 46%.

• In the past year, among parents who have bought toys online, 79% made the toy
purchase on the Taobao platform. Other major platforms include Tmall (56%) and
jd.com (39%). The average price of toys purchased online is Rmb112.

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5.5 Major Toy Clusters in China

China is a major toy producer in the world. It is estimated that about 85% of toys worldwide
is made in China. China currently produces and distributes two-thirds of the multi-billion
dollar toy industry’s global demand. The five provinces of Guangdong, Jiangsu, Zhejiang,
Shandong and Fujian, as well as Shanghai, collectively account for 95% of toy sales in China.
Guangdong province, the most important Chinese toy production and export base, represents
70% of toy sales by China. The bulk of toy exports are produced to OEM orders for foreign
brands. Toys made in China have lots of categories; here these are divided by types and
manufacture areas (Table 5.1 and Figure 5.1).

Table 5.1: Types of Toys and Manufacture Areas in China

Sl. Toy Toys Manufacturing Area

No. Category
1. Remote RC Helicopter, Cars, Shanghai, Shandong
control Boats, Quadrocopter
Toys
2. Diecasts & Cars,Trucks, Car Shanghai
Toy Models
Vehicles
3. Toy Lego Toys, Animation Shanghai
Figures Figures
4. Doll & Toy animals, Mainly in Yangzhou and
Stuffed Puppets, Mascot, Qingdao, but there are also
Toys Costume some in Yiwu, Shandong and
other cities
5. Classic Yoyo, Balloon, Balls, Shenghai, Yiwu, and other
Toys Kaleidospce cities depending on products
6. Learning Toy Musical Yunhe(Zhejiang province) for
& Instrument wood made toys
Education
Toys
7. Outdoor & Kid’s Slide, seesaw Yongjia (a small town of
Playground Wenzhou), the capital of
Toys playground toys in China
8. Models & Building Blocks Shanghai, Yiwu
Building
Toys
9. Baby Toys Baby Rattles, Baby No specified cities, but mainly
Walker in Zhejiang and Guangdong
Province
10. Puzzles & Puzzles, Magic Cube High quality Puzzles mainly
DIY Toys produced in Shanghai. DIY
craft toys mainly produced in
Yiwu.
Source: Jingsourcing.com

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Figure 5.1: Major Toy Clusters based on Suppliers in China

2.4% 1.6% 2.6%

2.6%
Guangdong
8.9%
Zhejiang
8.1%
Jiangsu
Shanghai

73.8% Shandong
Fujain
Others

Source: Made-in-China.com

Chinese toy manufacturing activity is highly concentrated in Guangdong province in Middle

South China, which accounts for almost half of industry revenue. This is mainly due to many
Hong Kong-, Macau- and Taiwan-funded investors having their factories in the province. This
province is also home to 41.8% of total enterprises and two-thirds of industry employees, and
is the largest toy exporter of China. Jiangsu province and Shandong provinces account for
21.8% and 10.4% respectively to total industry revenue in 2014.

5.6 Market Competition

Competition in the Chinese toy market is intensifying. The high-end of the market is
dominated by foreign enterprises. Almost all international toy giants have established their
own factories on the mainland or collaborated with local manufacturers for production. Most
of the major international toy enterprises have also made their inroads into the mainland
market by way of appointing sales agents or setting up their own marketing operations there –
Sega of Japan and US’ Mattel and Hasbro.

Chinese toy exporters are facing tremendous pressure due to declining external demands,
escalating local production costs and changes in the Renminbi exchange rate. Many
enterprises are increasingly looking to the domestic market for business opportunities. In
recent years, many brands have proactively set up sales channels to tap into the local market,
among which are international brand names such as Disney and DreamWorks and local
brands like Auldey, Goodbaby and Great Dreams. Foreign toy products made by Sino-foreign
joint ventures make up the lion’s share of the domestic toy market. In a survey, it was found
that 41.6% of the respondents opined that Disney, among various players in the toy market,
tops the corporate social responsibility rankings. Its competitors, Goodbaby, Barbie, Lego and
Fisher-Price, are placed second to fifth places respectively.

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Unbranded toys do not adhere to guidelines- such as weights and measures- mandatory for
indigenous toy companies. Many do not print the addresses of manufacturers/importers, the
maximum retail price (MRP) or manufactured date. The inexpensive Chinese toys have
replaced the branded Indian toys. It has been estimated that almost 85% of the toy market in
India has been taken over by the Chinese products. The Chinese are offering toys at very low
prices with large varieties to choose from. They look attractive and are within the reach of
common people. For example a simple toy which is sold by Indian manufacturer at Rs. 25
will be sold at Rs. 20 by their Chinese counterparts.

While OEM remains the primary production mode in China’s toy industry, changes are taking
place. Some Chinese toy makers are paying more attention to R&D. A number of key
enterprises with their own proprietary IPR and brand names have emerged, such as Auldey,
Lanmao, Goodbaby, Meisida and Huawei. In the Pearl River Delta region, toy enterprises
have also embarked on transformation and shifted gradually their operations to other activities
of the value chain like sales and marketing and product development.

5.7 Sales Channels

Traditional sales channels for toys include major shopping centers offering mainly mid- to
high-end, international brand name toys; supermarkets and hypermarkets which are important
sales avenues for medium-to-low priced toys; and wholesale markets. Specialty stores and
franchise chains such as Toys “R” Us, Edutainment, Leyou and Lijiababy have been
expanding in recent years and new sales channels like online shops have also flourished.

Toy suppliers have found their way into the fast developing e-commerce platforms in recent
years. According to Tmall.com, a number of toy brands like Hasbro, Barbie, Toys “R” Us and
Bandai from Japan have gained a foothold in baby.tmall.com. Meanwhile, some foreign
brands have successfully entered the mainland market through online platforms.

There are two main ways through which foreign brands break into the Chinese market: by
appointing agents to assist in penetrating the market or making a direct entry into the retail
sector. The products offered by these foreign toy makers are essentially toys with high
technology content like electronic toys, educational toys and game consoles, posing direct
threats to the traditional toy market.

Zoos, museums and science and technology museums also serve as sales channels for toys.
These venues offer markedly different products from those in department stores, with each
having their own focus. While zoos offer relatively more animal figurines, museums often
make available a full range of dinosaur toys, and science and technology museums deal
mainly in intellectual toys of all kinds.

5.8 Compliance to Standards

China implements zero tariffs for toys from countries and regions enjoying the Most Favored
Nation (MFN) status. Under the Regulations for the Administration of Inspection of Toy
Imports and Exports, inspection must be carried out on each and every batch of imported
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plush toys, mechanical toys, battery-operated toys, plastic toys, inflatable toys, wooden toys,
children vehicles and other toy categories included in the list of imported toys subject to
inspection. Those which fail the inspections must not be sold or used.

Since, October 01, 2004 a new set of mandatory national standards for children’s toys has
been in effect. In the new standards, more attention has been paid to the potential danger in
toys, with an aim of minimizing hazards posed to children. The new standards differ from the
old ones mainly in the limits imposed on hazardous heavy metals. While a test on selenium
has been added, most of the indicators in the new standards are more stringent.

Foreign companies venturing into the mainland toy market need to be aware of the relevant
standards applicable to the industry. In the Standardization Law of the People’s Republic of
China which took effect on April 01, 1989, four levels of standards are stipulated: national
standards, industry standards, local standards and enterprise standards, in descending order of
binding force. National standards are classified into mandatory and recommended standards,
represented respectively by standard codes GB and GB/T. For industry standards, there are
likewise mandatory standards and recommended standards, and the toy industry is deemed a
light industry and represented by the standard codes QB and QB/T respectively. Local
standards are mandatory standards within their respective administrative regions, while
enterprise standards are applicable to the respective enterprises. For details of the standards,
reference can be made to the standardization website hosted by the Industry Coordination
Department of the National Development and Reform Commission and the website of the
Standardization Administration of the People’s Republic of China.

On 1 June 2007, the new version of the National Standard on Instructions for Use for Toys
was implemented. Compared to the 1996 version, revisions on labelling requirements have
been made in aspects like age grading, safety warnings, major ingredients and materials,
usage methods, and repair and maintenance. New requirements on durability labelling and
installation positions have also been added.

Since September 15, 2009, the AQSIQ has implemented the Measures for the Administration
of Inspection and Supervision of Toy Imports and Exports. It requires that for imported toys
not listed in the CCC catalogue, a report from the lab for testing toy imports and exports
certifying that the products have passed the relevant tests should be furnished.

The Technical Requirements for Environmental Certification of Wooden Toys have been
implemented since June 01, 2010. The national standards set out requirements for
environmental performance associated with the production of wooden toys and their raw
materials and packaging materials.

Since February 01, 2012, the Guidelines for Matching Toys with Children’s Age have been in
force. The guidelines apply to toys which are designed for children aged below 13, and set out
methods of matching toys with children’s age and the relevant jargons and definitions.

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The General Technical Requirements on Inflatable Toys have been in force since July 01,
2012. The requirements apply to inflatable toys for children aged below 14, and set out the
jargons and definitions pertaining to inflatable toys as well as the relevant technical standards,
testing methods and classification of defects.

In 2015, the Certification and Accreditation Administration started a new round of fine-tuning
and revision of the implementation regulations on the compulsory certification of toys. The
intention is to raise the requirements on the implementation of certification and will probably
include plush toys and wooden toys in the list for mandatory certification.

To ensure the safety and quality of children’s toys and to protect the health and safety of
children, the Standardization Administration of China (SAC) has revised GB 6675-2003:
National Technical Requirements for Toy Safety which forms parts 1 to 4 of GB 6675-2014:
National Standard for Toy Safety. The requirements are mandatory and have come into force
from January 01, 2016.

5.9 Future Trends for the Chinese Domestic Market

The main factor for increase in demand of toys is the increases in disposable incomes of the
consumers. In the category of traditional toys and games, construction toys and outdoor and
sports toys remain popular among players. In video games, games for PCs/MACs and PC and
console game downloads increasingly supported by domestic players because of their insight
of Chinese consumers’ preferences.

5.10 Export Market

China is still the world's largest manufacturer and exporter of toy products. It produces and
exports more toys than any other country in the world with Guangdong Province alone
making the largest share of the country’s total manufactured output. Exports of toys in China
has increased from US $ 10.8 billion in 2011 to US $15.7 billion in 2015 (Figure 5.2)
recording the compound annual growth rate at 10%. However, the industry continues to suffer
and in the past two years has fallen to 6.6% each year. Part of the problem may be explained
by strict safety standards introduced by Western Governments and safety awareness among
consumers are adversely affecting shipments of toys from China with high levels of lead. For
example, laws passed by the U.S. Congress require that lead levels in the paint used to coat
children’s toys be tested for lead and certified by independent laboratories. Regulations for
exporting to European countries are even stricter. New laws ban the use of certain fragrances
on toys bound for that continent. Chinese manufacturers respond to the new requirements by
changing their manufacturing practices to accommodate such restrictions though it could
elevate their costs by 20%. There is a realization in China that they must change the way they
do business in order to survive in this new economy.

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Figure 5.2: China’s Toy Export Value

16

14

12

US $ in Billion
10

0
2011 2012 2013 2014 2015

Source: Wind Info

According to China Toy and Juvenile Product Association, the major items exported are:

• Traditional toys (include dolls, educational toys, puzzles, electric trains and toy
musical instruments etc.)
• Video games (not coin or disc-operated)
• Festive articles
• Baby strollers & bicycles

The top 10 export destinations for China are USA, Hong Kong, UK, Japan, Germany,
Philippines, Singapore, Russian Federation, Canada and France. Details of toy exports from
major clusters are given in Table 5.2

Table 5.2: Cluster wise Exports of Toy Products, January-March 2014

Region Volume (-) Value Compared with the

(million (US$ same period last year
nos) million) Volume (%) Value (%)
Guangdong 2087.92 1487.47 -0.5 9.7
Zhejiang 1078.94 280.12 23.2 20.3
Jiangsu 1134.27 206.78 79.8 12.7
Shanghai 76.57 79.354 56 2.1
Shandong 37.23 62.89 -6.9 8.4
Jiangxi 56.78 47.38 31 6.2
Fujian 106.58 44.88 -10.8 23.2
Source: Customs Information Network, China Government

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China’s toys were exported mainly from Guangdong, Zhejiang and Jiangsu. Among which,
the export value of Guangdong accounted for 65.12% of China’s total export value for toys,
while the export value of Zhejiang and Jiangsu accounted for 12.26% and 9.05% respectively
of China’s total toy export.

Major retailers in Beijing and Shanghai, including 17 top departmental stores of leading toy
and baby product retail chains, such as Shin Kong Place, Bao Da Xiang Shopping Center for
kids, Lijia Baby and MAMA’s Goodbaby etc., participated and started the promotion of
safety Commitment Campaign on Toys & Baby Products, to guide Chinese consumers to buy
Safety Commitment Brands and high quality products. Till now, 123 overseas and Chinese
famous brands, including Mattel, LEGO, Barbie, Transformer, Hot Wheels etc., have joined
the campaign and pledged their commitment towards producing safe and quality products in
China.

Apart from these, China’s domestic toys and games has advantages of
• Low wages
• Counterfeiting and piracy
• Minimal worker health & safety regulations
• Lax environmental regulations & enforcement
• Export industry subsidies, highly efficient “industrial network clustering”
• Catalytic role of Foreign Direct Investment (FDI)
• Superior infrastructure- both general and specific to toy sector
• Proximity to Hong Kong
• Large scale operations
• An undervalued currency.

5.10.1 Trends and growth of export of China’s Toy Market

Capitalizing on advantage of the raw materials and cost of labor, China has become the
largest manufacturer and exporter of toys in the world. The export of China’s toys slowed to
some extent, the export amount realization US $ 15.7 billion, up 10.8% compared with 2011.
The export market of China’s toy manufacturing focuses on OEM (original equipment
manufacturer), low proportion of high creative products, extreme concentration of export
markets and the decrease of export profit and cost.

According to Huidian Research, the rising consumption demand brought by the changes of
lifestyle and upgradation of consumption encourage the rapid development of related
industries. Under such background, the toy industry has broad development prospects and
especially, the progress of the urbanization construction and the plan to double the wages
inescapably support the rapid development of the mass consumer goods and become the
continuous inspiration to promote the toy products to release the market demand, which will
be the opportunity for the future development of toy industry in China.

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5.11 Challenges Faced by China’s Toy Market

China was able to withstand global economic crisis of 2008-09 and had grown consistently
over the years. However, for 2012, it was a year full of challenges and opportunities for
China’s toy industry. On the one hand, the toy industry faced the pressure caused by the
fluctuations of raw materials prices and exchange rate, the rising labor cost and the continuous
depressed overseas demand caused by the European and American debt crisis. On the other
hand, it faced the huge development opportunities brought by the rapid rising of the foreign
emerging markets and the continuous upgrading of the domestic consumption market.

In 2013, the economic slowdown in China did contribute to consumers’ reluctance to increase
the spending on toys and games. Still willingness to spend on toys and games supported
double-digit growth of the toy market. More adult consumers perceived that toys that promote
learning skills were more suitable, which led to dynamic growth in construction toys,
scientific/educational toys, arts and crafts and action figures and accessories. Games and
puzzles remained the largest category in traditional toys and games in 2013, due to a steady
consumer base buying poker cards in China, but games and puzzles had the lowest growth
rate in 2013 because of the maturity of this category. Other categories registered healthy
growth in 2013, given that consumers sought products in each category.

Chinese consumers have been more aware of the side effects that unbranded pirated toys can
pose. In traditional toys and games, multinational brands and well-known domestic brands are
being chosen by more consumers, with more of them holding rational attitudes towards value-
for-money products and putting product safety and product quality ahead of price incentives.
In video games, multinational video game software manufacturers are still pressured by
pirated products and disadvantaged. However, domestic players cope up with pirated software
by providing lower price for digital version products, and therefore, receive positive feedback
from consumers.

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CHAPTER 6

SWOT ANALYSIS OF INDIAN TOY INDUSTRY

6.1. Strengths

 Growing large domestic market.

 Increase in demand due to rise in the disposable income of domestic consumer.
 Growing confidence of both- domestic and international buyers in the Indian toy
industry.
 Availability of most of the raw materials.
 Availability of skilled manpower at comparatively lower cost.
 Emergence of India on global toy scene.
 Support structures available for obtaining finance.
 Innovation skills.
 Less overhead costs.
 Wide range of products.
 Business acumen of the entrepreneurs.
 Manufacturing industry network & linkages.
 Pool of support institutions.
 Capacity to compete under adverse conditions.

6.2.Weaknesses

 Most of the toy industry is tiny in size hence Low Volume of Production.
 Lack of Research and Development facilities.
 Toy specific designers not available.
 Fragmented Technical knowledge.
 Absence of strong & professionally managed Toy Industry Associations.
 Lack of synergy and coordination amongst various toys manufacturers-critical for
Component Approach.
 Poor process capability because of low technology, inferior tooling and use of
general-purpose machines for specialized jobs.
 Absence of focus on export.
 Inadequate technical capabilities particularly in electronic toys and video games.
 Quality parameters are not followed.
 Surface finish and other features are poor.
 Higher production cost due to lack of economies of scale.
 Lack of range /poor presentation.
 Insufficient/ inconsistent vendor support.
 Comparatively higher cost of funds.
 Costly Special Purpose Machines/ Very high cost of foreign technologies.
 Lack of pride in workmanship.
 Insensitivity to customer needs/ poor channels of customer feedback and customer
complaint redressal system.
 Minimal expenditure on brand building, advertising.
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 Weak online presence.

 Lack of professional management.
 Reluctance to introduce new product designs because of unfavorable economies of
scale.
 Imported toys are cheaper in cost, versatile in features, attractive and handy in
packaging and better in quality.

6.3. Opportunities

 Well developed market-domestic as well as overseas.

 Growing domestic market and buying capacity.
 Almost one third of the population under 14 years of age to expand market.
 Liberalized economy, “Make or Buy” decisions easier.
 Low cost manufacturing base- enabling strategic alliances/ Potential co-operation
with large customers and multinationals.
 Better support from government through Inter-Ministerial Committees
 Increasing surplus income of Indian middle class.
 Toys recognized as a better medium for education in a play way method.

6.4. Threats

 Competition from international players as they started manufacturing operations in

India.
 China and other countries corner major market share of the growing Indian toy
market.
 Technology obsolescence is creating road blocks to rapid changes in product
design and also for adjusting to consumer preferences.
 Slow response to safety & quality standards based on international market
requirements.
 Toy units diversifying to other sectors leading to poor component base.
 Shift in market demand to electronic toys in which India does not have competitive
edge.
 Enhanced brand consciousness amongst Indian consumers.
 Children devoting more time to computers/ internet/ studies, leaving less time for
games and toys.
 Increasing concern among international buyers about quality aspects of Indian toys.
 Low scale of operation capabilities with Indian manufacturers.
 With the melting of international trade boundaries, free flow of Chinese toys
accessed the Indian market, having dual impact on the local toy industry.

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CHAPTER 7

TOXICITY & SAFETY OF TOYS

7.1. Introduction

Toy Safety is the practice of ensuring that toys made for children are safe, usually through the
application of a set of safety standards. Toxicity and Safety aspects have become a major
concern among parents all over the world while buying toy products for children. Toys are
supposed to be fun and are an important part of any child's development. However, each year
scores of kids are treated for toy-related injuries. Choking is a major risk for kids in the age
group of 3 years or younger, because they tend to put objects in their mouths. Toy
manufacturers follow certain guidelines and label most new toys for specific age groups. But
perhaps the most important thing a parent can do is to supervise play.

Here are some general guidelines to be checked while shopping for toys:
• Toys made of fabric should be labeled as flame resistant or flame retardant.
• Stuffed toys should be washable.
• Painted toys should be covered with lead-free paint.
• Art materials should be nontoxic.
• Look for the UL (Underwriters Laboratories) seal on electrical toys. It indicates the
electrical parts have been tested for safety.

7.2. Safety Regulations

Safe toys must be well designed and age appropriate, durable, and non-toxic. Always read labels to
make sure a toy is appropriate for a child's age. Many studies have reported that
environmental hazards are caused by the toxic contents of toys which are mostly made in
China. Therefore, quality measures are required to be set and inspected on regular basis.

In India, Bureau of Indian Standards (BIS) and in USA the Consumer Product Safety
Commission (CPSC) has clearly formulated the standards relating to toy safety in terms of
their physical form and toxicity. Most of the manufacturers either not follow safety norms or
are completely oblivious of the norms. Guidelines published by the CPSC and other groups
are helpful to make the buying decisions. Child's temperament, habits and behavior also need
to be considered before buying a new toy. Moreover, age levels for toys are determined by
safety factors, not intelligence or maturity of the child.
Here are some age-specific guidelines with respect to toy products:
7.2.1. For Infants, Toddlers and Pre-schoolers
• Toys should be large enough at least 1¼ inches (3 centimeters) in diameter and 2¼
inches (6 centimeters) in length so that they can't be swallowed or lodged in the
windpipe. A small-parts tester, or choke tube, can determine if a toy is too small.
These tubes are designed to be about the same diameter as a child's windpipe.

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• Avoid marbles, coins, balls and games with balls that are 1.75 inches (4.4 centimeters)
in diameter or less because they can become lodged in the throat above the windpipe
and restrict breathing.
• Battery-operated toys should have battery cases that secure with screws so that kids
cannot open. Batteries and battery fluid pose serious risks including choking, internal
bleeding and chemical burns.
• When checking a toy for a baby or toddler, make sure it's unbreakable and strong
enough to withstand chewing. Also, make sure it doesn't have:
o Sharp ends or small parts like eyes, wheels or buttons that can be pulled loose.
o Small ends that can extend into the back of the mouth
o Strings longer than 7 inches (18 centimeters)
o Parts that could become pinch points for small fingers.
• Most riding toys can be used once a child is able to sit up well while unsupported - but
check with the manufacturer's recommendation. Riding toys like rocking horses and
wagons should come with safety harnesses or straps and be stable and secure enough
to prevent tipping.
• Stuffed animals and other toys that are sold or given away at carnivals, fairs, and in
vending machines are not required to meet safety standards. Check carnival toys
carefully for loose parts and sharp edges before giving them to your infant.

7.2.2. For Grade Schoolers

• Bicycles, scooters, skateboards and inline skates should never be used without helmets
that meet current safety standards and other recommended safety gear like hand, wrist
and chin guards. Look for CPSC or Snell certification on the labels.
• Nets should be well constructed and firmly attached to the rim so that they don't
become strangulation hazards.
• Toy darts or arrows should have soft tips or suction cups at the end, not hard points.
• Toy guns should be brightly colored so they cannot be mistaken for real weapons, and
kids should be taught to never point darts, arrows, or guns at anyone.
• BB guns or pellet rifles should not be given to kids under the age of 16.
• Electric toys should be labeled UL, meaning they meet safety standards set by
Underwriters Laboratories.
7.2.3. Keeping Toys Safe at Home
After buying safe toys, it's also important to make sure kids know how to use them. The best
way to do this is by supervising their play. Elders playing with kids alongside teach them how
to play safely while having fun.
Parents should:
• Teach kids to put toys away.
• Check toys regularly to make sure that they are not broken or unstable:
o Wooden toys should not have splinters.
o Bikes and outdoor toys should not have rust.
o Stuffed toys should not have broken seams or exposed removable parts.
• Throw away broken toys or repair them right away.
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• Store outdoor toys when they are not in use so that they are not exposed to rain, sun or
snow.
And be sure to keep toys clean. Some plastic toys can be cleaned in water, but read the
manufacturer's directions first. Another option is to mix antibacterial soap or a mild detergent
with hot water in a spray bottle and use it to clean toys, rinsing them afterwards.
7.2.4. Dangerous Objects
Many non-toys also can tempt kids. It is important to keep them away from:
• fireworks
• matches
• sharp scissors

7.3. Toxic Aspects of Raw Materials

7.3.1. METALS
 Lead
 Uses: stabilizer in Polyvinyl Chloride (PVC); pigmentation in paint, rubber, plastics,
ceramics; cheap metal jewelry
 Found in: jewelry, paint and PVC
 Concern: neurotoxicity
 Cadmium
 Uses: stabilizer in PVC, coatings & pigments in plastic and paint.
 Found in: jewelry and PVC
 Concern: developmental effects and known carcinogen.
Health Effects: Depending on the level of exposure, cadmium has been linked to:
 Cadmium exposure is associated with developmental effects, including possible
decreases in birth weight, delayed sensory-motor development, hormonal effects, and
altered behavior (Schantz 2001).
 Cadmium can cause adverse effects on the kidney, lung and intestines (ATSDR 2005).
 Cadmium is classified as a known human carcinogen, associated with lung and
prostate cancer (Huff 2007).
 Exposure to cadmium can result in bone loss and increased blood pressure (Gilbert
2004).
 Acute toxicity from ingestion of high levels of cadmium can result in abdominal pain,
nausea, vomiting and death (Gilbert 2004).
 Bromine
 Uses: flame retardants, most often listed as “brominates flame retardant”
 Found in: furniture, textiles and plastic encasing electronics.
 Concern: persistent and toxic, possible carcinogen, may affect brain development, may
cause reproductive problems.

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7.3.2. Chloride
Detection of chlorine in a toy component indicates the likely use of PVC (polyvinyl chloride)
or vinyl, a widely used type of plastic. PVC is of concern to the environment and public
health during all phases of its life cycle.
During the production phase, workers at PVC facilities, as well as residents in surrounding
areas, may be exposed to vinyl chloride (a building block of PVC) and/or dioxin (an
unwanted byproduct of PVC production), both of which are carcinogens. At the end of a
product's life, PVC can create dioxin when burned. PVC is not easily recycled. Lead and other
heavy metals are sometimes used as a stabilizer or to impart other properties to PVC plastic.
7.3.3. Mercury
Mercury is a metallic element. Its compounds are often used in inks, adhesives, and as a
catalyst in reactions to form polyurethanes (ATSDR 1999). Healthytoys.org has detected low
concentrations of mercury in a number of different toy components. Mercury can exist in
different forms and some forms are more toxic than others. Methyl mercury is a form of
mercury that is particularly hazardous to the developing brain. The main pathway of exposure
to methyl mercury is from eating contaminated fish and it is unlikely that this form would be
present in children's toys. However, the use of mercury in children's products means potential
exposure of workers to this compound and release to the environment when the product is
discarded.
Health Effects of mercury :
 Mercury is a persistent toxic chemical that can build up in the body.
 All forms of mercury can affect the kidneys (ATSDR 1999).
 Organic, inorganic, and metallic mercury are toxic to the nervous system, each
affecting different regions of the brain (ATSDR 1999).
7.3.4. Arsenic
Arsenic is an element that can be present in both organic and inorganic compounds. Arsenic
trioxide, an inorganic arsenic compound, is primarily used as a wood preservative. It is now
imported and not domestically produced. In recent times, it has been found in children’s
products, though the reason for its presence is not clear. It may be used as a dye in plastics
and textiles. The XRF technology does not allow us to assess the form of arsenic detected,
although it is possible that the arsenic is in children’s products in the more toxic inorganic
form.
7.3.5. Phthalates
Since PVC is an inherently brittle material, it requires additives to make it flexible and to
impart other desired properties. Another group of additives commonly found in PVC products
are phthalates. Phthalates are used in many plastics, especially PVC products, as a softening
agent to make the plastic flexible. Over 90% of all phthalates are used in PVC products.
Phthalates - group of chemicals commonly used as plasticizers mainly to soften PVC-
• Soft toys typically contain 15-20% phthalates.
• New shower curtain smell.

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• Health effects are controversial.

Table 7.1. Commonly Used Phthalates and their Potential Effects

Types of Common Uses Potential Effect
Phthalate
DEHP di Wall coverings, tablecloths, floor tiles, furniture • Human immune
(2 -ethylhexyl) upholstery, shower curtains, garden hoses, system toxicant
phthalate swimming pool liners, rainwear, baby pants, • Strong evidence of
dolls, toys, shoes, automobile upholstery, endocrine disruption
packaging film, wire & cable sheathing, • Possible human
medical tubing, blood storage bags. developmental
DBP (di-n-butyl Carpets, paints, glue, insect repellents, hair toxicant
phthalate) spray, nail polish, and rocket fuel • Limited evidence of
Diethyl Toothbrushes, automobile parts, tools, toys, reproductive toxicity.
phthalate food packaging, cosmetics, insecticides and
aspirin.

7.4. Safety Standards of Toys in India

The organized segment of the toy industry in India is aware of the safety norms and
expectations of the parents. Ministry of Small and Medium Enterprises (MSME) under the
National Programme for Development of Toy Industry (NPDTI) had established a Toy
Testing facility at Okhla, New Delhi. This is to facilitate toy industry to develop and produce
toys confirming to National and International Standards. Technical standards and legislations
in the toy field have been written with the aim of avoiding different types of hazards a toy
may cause, taking into account the foreseeable use of the toys, and bearing in mind the
behaviour of children. In this context, Indian Standards (IS) address to some specific hazards
that a toy may present. Based on Indian Standard Specifications of 9873 (Part I, II and III), a
comprehensive toy testing facility had been set up and maintained. The tests prescribed under
the toxicity following safety specifications can be conducted in the centre.
• Safety aspects related to mechanical and physical properties as per IS:9873 (Part I)
• Safety of Toys : Flammability Test as per IS : 9873 (Part II)
• Safety of Toys : Migration of elements as per IS: 9873 (Part III)
At present, the development and production of Toys conforming to Indian Standard
Specifications on safety is voluntary. But in the recent years, with due awareness, interest in
developing new design, concepts and expanding markets, it would be necessary to consider
this. With the growth of Toy Industry and expansion of market, toy manufacturers and
distributors need to pay attention to ensure that toys are within the permissible level of
toxicity and should give due consideration to overall safety aspects as well.
Safety and Toxicity aspect would be one of the most important aspect which would supervise
and advice on the growth and development of this sector. Suitable measures need to be
worked out to motivate toy manufacturers and distributors to take up this as a part of the
business development.
The materials used in toys like plastics, paints and fabrics are made up of chemicals and may
also contain added chemicals to impart specific properties such as rigidity, durability,
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flexibility or flame resistance. When children put these products into their mouths, some of
these chemicals may enter their bodies. The chewing, licking and swallowing behavior of
children allow the substances, which are not always chemicals bound to the products, may
also be released directly into skin, or into the air that children breathe. Children’s bodies are
more vulnerable to the effects of toxic chemicals. It is widely accepted that no level of lead or
cadmium in the blood should be considered safe for children.
Toys made of polyvinyl chloride (PVC) are potentially toxic to children as PVC contains both
Lead and Cadmium. Lead and Cadmium are known poisons, being neurotoxins and
nephrotoxins, respectively. Lead and cadmium compounds act as stabilizers but they readily
reach out. They can also be used in pigments to impart bright colors to toys in order to attract
children. Chewing and swallowing behavior of children is a common source of lead and
cadmium exposure. Lead is not biodegradable. It persists in the soil, in the air, in drinking
water and in homes. It only accumulates where it is deposited and can poison generations of
children and adults unless properly removed. At high levels, lead poisoning causes coma,
convulsions and even death. At low levels of toxicity, it causes reductions in IQ and attention
span, reading and learning disabilities, hyperactivity, impaired growth, behavioral problems
and hearing loss. These effects are long term and may be irreversible.

Table: 8.1 Indian Standards on Toxicity

Element (ppm)
Toy Material
Sb As Ba Cd Cr Pb Hg Se
Any toy material
given in clause 1,
60 25 1000 75 60 90 60 500
except modeling clay
and finger paint
Modeling Clay and
60 25 250 50 25 90 25 500
finger paint

The existing Indian standard for maximum lead content in paints is governed by a standard set
by the Bureau of Indian Standard (BIS). BIS is only a scientific–technical body which
recommends parameters and standards. It is up to the relevant ministries to make standards
mandatory by bringing in necessary legislation. This requires adherence to an “Eco-Mark”
scheme, which in turn requires that the manufacturers ensures that the Lead Concentration is
below 1000 ppm. The paint samples studied by Toxic Link showed concentrations as high as
14000 ppm. Currently, there is no regulation making it obligatory for the toy manufacturers in
India to comply with any safety standard. Thus, industries have the option of complying with
BIS standards if they want compliance certificates, but they are still free to manufacture and
sell their products without compliance marks. Also manufacturers do not register for the ISI
mark for their products because it is an expensive procedure. Many regions have modeled
their safety standards on the EU’s EN 71 standard, either directly or through adoption of the
ISO-8124 standard which itself is modeled on EN 71.

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7.5. Bureau of Indian Standards’ Guidelines

The Bureau of Indian Standards (BIS) on April 21, 2011 released its draft regulations on
standards on phthalates to make plastic toys. The draft standards have been released
following a Bombay High Court Order on March 24, 2011. The court’s direction was in
response to the Public Interest Litigation (PIL) filed by the Mumbai non-profit Consumer
Welfare Association in 2007 demanding stringent regulations for phthalates in toys. Studies
show that phthalates damage male reproductive system, impair lung functioning and affect
pregnancy. The new norms has been included in part 3 of the BIS standard for safety
requirements of toys (IS 9873) on July 3, 2011.
1. IS 9873 (part 1): 2001/ISO 8124-1:2001 covers safety requirements of toys, safety
aspects related to mechanical and physical properties.
The requirements in this part apply to all toys and acceptable criteria for structural
characteristics of toys such as shapes, size, contour, spacing and criteria for properties
peculiar to certain categories of toys are specified. The standard specifies the requirements
of test methods for toys intended for use by children of various age groups from birth to
14 years. A drop test may be carried out to know the physical strength of the toy. Eye of a
doll toy may be pulled with a predetermined force to know the behavior of this accessory
when the toy is being played with by the child.
2. IS 9873 (Part 2): 1999/ISO 8124-2.1994 covers safety requirements of toys,
flammability requirements
This standard specifies the categories of flammable materials, which are prohibited in all
toys and requirements concerning flammability of certain toys when they are submitted to
a small source of ignition. The standard includes general requirements relating to all toys
and specific requirements and methods of testing relating to some of the selected toys.
This type of test will be very much important for push toys and other toys which have a
tendency to catch fire in adverse conditions.
3. IS 9873 (Part 3): 1999/ISO 8124-3:1997 covers safety requirements of toys, migration
of certain elements
This part specifies maximum acceptable levels and methods of sampling & extraction
prior to analysis for migration of the elements antimony, arsenic, barium, cadmium,
chromium, lead, mercury and selenium from toy materials and from parts of toys. This is
also governed by ISO 8124, adopted by International Organization for Standardization.
The migration of elements is specified from the following toy materials:-
 Coatings of paints, varnishes, lacquers, printing inks, polymers and similar coatings.
 Polymeric and similar materials including laminates, whether textile reinforced or not, but
excluding other textiles.
 Paper and paper board upto maximum mass per unit area of 400 gms per sq. mt.
 Natural or synthetic textiles
 Glass/ceramic/metallic materials, excepting lead solder, when used for electrical
connections.
 Materials intended to leave a trace (e.g. the graphite materials in pencils and liquid ink in
pens).
 Pliable modeling materials including modeling clays and gels.
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 Paints to be used as such in the toy including finger paints, varnishes, lacquers, glazing
powders and similar materials in solid or liquid form.

4. ISO 8098:1989 Cycles – safety requirements for bicycles for young children.

Toy safety standards are continually updated and modified as the understanding of risks
increases and new products are developed. For example, the new European standard EN 71-
4:2013 was published in 2013. It replaces and updates the 2009 version of the same standard
since the latter and newest has been harmonized under the EU Toy Safety Directive. The new
method is a reference test method regulating chemicals in toys and juvenile products. This
gives a new test method for ‘Experimental sets for chemistry and related activities’ under the
toy safety EN 71 series.
According to the study of Delhi-based NGO Centre for Science and Environment (CSE) in
2010 some toys breached the limits that are set by the European Union by more than 60-160
times. Out of the 24 samples picked randomly, 14 were found to be from China and two from
Taiwan. It is noted that 57% of China-made toys and 100% of Taiwan-made toys crossed the
safe limit. Another study which is conducted by the Greenpeace-IPEN (2011) measured toxic
metals in 500 children's products purchased in five Chinese cities: Beijing, Guangzhou, Hong
Kong, Shanghai, and Wuhan. The results showed that one-third of tested products contained
at least one toxic metal at levels of concern. Forty-eight samples (9.6% of the products)
contained more than one toxic metal, increasing the possibility of harm. None of the tainted
products contained warning labels to inform consumers about their toxic ingredients. The toys
that tested positive for heavy metals, including lead, were found in every category of product,
no matter whether it was branded or non-branded, cheap or expensive. In short, no matter who
or where you buy the toy in China, there is a possibility that a toxic metal is present.

7.6. Safety Regulation on Import of Toys from China

EU and other countries mandatorily regulate the chemical content whereas India and China do
not have such standards. Indian standards are voluntary in nature and no license has been
granted for this standard. Since BIS has not granted any Certification license for toys against
the Indian Standard, it cannot enforce it against manufacturers of toys. The government in
January 2009 has put quality restrictions on toys from China that does not meet international
safety standards and norms. But the restriction was eased later after Beijing questioned the
restrictions on the ground that New Delhi did not put such curbs on toys from other countries.
The government has two options either regulate all toys, both domestic production and
imports, or let the order expire and leave the entire market unregulated.
India must provide safe environment to children so that they are not exposed to toxic
chemicals. This can only be achieved by implementing a robust regulatory mechanism and
preventive approach through the use of safe and non-toxic materials. At present India have no
enforceable standards for lead, cadmium and other toxic metals permissible in toys. Toys,
particularly soft PVC toys, which are intimately linked to children’s environment, have not
been investigated as one of the possible sources of lead, cadmium and other heavy metals
exposure to children.

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Safety & toxicity in toys need to be considered as integral component of design development,
training and awareness programmes as part of the overall programme for the development of
toy sector. This is essential but complex area particularly if tiny and cottage industry is also
included.
There are some suggestions which can be followed in India for the safety purpose of children.
These safety suggestions are as follows-
1. Brands and manufacturers should actively improve manufacturing processes and product
design, rapidly reduce and ultimately eliminate all hazardous substances, especially toxic
heavy metals such as lead, from their products and production processes. The industry should
also disclose information on chemical ingredients in products.
2. The government should strengthen its supervision over hazardous substances in children's
products. It should adopt a more protective lead concentration limit in children's products and
extend the concept of "total concentration limits" to other heavy metal substances using
protective regulatory limits.
3. Consumers should carefully read product labels and try to identify chemical safety
information before purchasing children's products. Through their inquiries about corporate
environmental policy and product chemical information, consumers can help drive companies
to progressively reduce and ultimately eliminate hazardous chemicals from their products and
production processes. Consumers should also support rigorous regulatory policies to limit the
presence of toxic substances in products.

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CHAPTER 8

FIELD SURVEY FINDINGS: TOY MANUFACTURING UNITS

8.1 Introduction

In this chapter an attempt has been made to study the issues and problems of the toy
manufacturing units in India on the basis of detailed field surveys across both traditional and
modern segments of toy manufacturing. The main objective of the field survey is to get the
feedback from the toy manufacturing units in terms of output, employment generation and
export competitiveness. The field survey has been carried out across 8 selected states with
structured questionnaires (Annexures 1.1 & 1.2) for identifying sector specific issues and
problems with a view to recommend appropriate policy measures in order to enhance
productivity and export competitiveness of the toy sector in the country. From the modern
segment 82 manufacturing units have been surveyed, while 55 manufacturing units have been
surveyed from the traditional segment. List of manufacturing units surveyed from both the
categories are given at Annexure IV.

8.2 Profile of Toy Manufacturing Units: Modern Segment

Modern toy manufacturing units have been surveyed with a structured questionnaire
(Annexure 1.1). The questionnaire was designed to elucidate firm level details such as
turnover, employment, domestic and foreign trade, product description, cost related
information, factors affecting productivity, factors responsible for competitiveness and
specific suggestions and feedback from these units. In the modern Toy Manufacturing
segment, field survey has been conducted across 8 states covering 82 toy manufacturing units.

State-wise distribution of the responding Toy manufacturing units from the modern toy
segment is given in Table 8.1. It is seen from the table that majority of the toy manufacturing
units surveyed are drawn from Delhi (34%) followed by 17% units each units surveyed from
Maharashtra and Tamil Nadu.

Table 8.1: Distribution of Modern Toy Manufacturing Units : NPC Field Survey
Sl. No. States No. of Units Percent
1 Telangana 2 2
2 Delhi 28 34
3 Gujarat 4 5
4 Karnataka 10 12
5 Maharashtra 14 17
6 Tamil Nadu 1 1
7 Uttar Pradesh 14 17
8 West Bengal 9 11
Total 82 100
Source: NPC Field Survey, 2015

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Figure 8.1: State wise Distribution of Surveyed Toy Manufacturing Units

West Bengal Telangana

11% 2%
Uttar Pradesh Delhi
17% 34%

Tamil Nadu
1%
Gujarat
Maharashtra 5%
Karnataka
17%
13%

The year of establishment of the manufacturing of the surveyed units are reported in the
range of 1890 to 2013. The field survey consists of 44 small units which accounts for 54% of
the total field survey whereas 41% surveyed units are micro and 5% units are medium
category (Table 8.2 & Fig 8.2).

Table 8.2: Category of Toys Manufacturing Units

Sl. No. Category Total No. of Percent
Units

1 Micro 34 41.5
2 Small 44 53.7
3 Medium 4 4.9
Total 82 100

Figure 8.2: Category wise Distribution of Toy Manufacturing Units

Medium
5%
Micro
41%

Small
54%

Furthermore, unregistered manufacturing units accounted for almost negligible share

i.e.1% whereas the rest is recorded by the registered units (Table 8.3).

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Table 8.3: Profile of Manufacturing Units

Sl. No. Particulars Yes No

1 Registered Units 81 1
(99%) (1%)
2 Members of Toy 75 7
Manufacturing Association (92%) (8%)
3 Having Quality Accreditation 16 66
(20%) (80%)
4 Units in favour of 22 60
accreditation helped in (27%) (73%)
business growth

As far as quality accreditations are concerned, only 20% units have received quality
accreditation of ISO 9000, HACCP etc. Among the sample units having accreditations, 27%
units reported that it helped in boosting business while majority does not in favour that these
accreditations helps to increase demand for the product. Out of total number of units, 91% are
having membership in Toy manufacturing Associations (Fig 8.3).

Figure 8.3: Memberships in any Toy Manufacturing Association

No
9%

Yes
91%

8.3 Operational Details of the Manufacturing Units

Table 8.4 provides averages of employment and capital investment over the years 2012-13 to
2014-15 across the surveyed units. Average number of skilled workers is reported to be about
20 persons besides 18 unskilled workers. Both wages and salaries and capital investment
reported considerable increase during this period.

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Table 8.4: Averages of Employment and Capital Investment

2012-13 2013-14 2014-15
Wages Wages Wages Capita
Unskille Capital Unskille Capital Unski
Sl. Skilled & Skilled & Skilled & l
States d Investme d Invest lled
No. Worker Salarie Worker Salarie Worker Salarie Invest
Worker nt Worker ment Work
s s s s s s ment
s (Rs. s (Rs. ers
(No.) (Rs. (No.) (Rs. (No.) (Rs. (Rs.
(No.) Lakh) (No.) Lakh) (No.)
Lakh) Lakh) Lakh) Lakh)
1 Telangana 6 11 24.63 80 5 11 26.5 67.5 5 13 27.75 67.5
2 Delhi 9 15 14.93 68.83 10 15 17.41 94.34 11 16 20.21 91.26
3 Gujarat 24 3 14.81 112.5 23 5 14.88 107.75 23 5 14.75 101.5
4 Karnataka 13 6 16.11 31.47 15 7 17.5 34.95 19 5 18.11 36.75
Maharashtr
5 13 21 29.1 31.13 14 22 31.39 36.96 14 22 33.83 41.51
a
6 Tamil Nadu 160 10 450.5 660 160 10 455 680 165 10 458 700
Uttar
7 37 34 77.32 270.76 39 36 75.33 332.12 43 36 81.96 361.82
Pradesh
West
8 18 1 5.37 15.46 18 1 6.29 15.59 16 1 6.31 15.98
Bengal
All India Average 19 17 32.63 94.1 20 18 33.94 115.75 21 18 36.6 119.32

Table 8.5: Average Installed Capacity, Capacity Utilization and Idle Capacity for the
average Manufacturing Units across states during 2014-15
Installed Capacity Capacity Utilization Idle Capacity
Average No. of Average No. of Average No. of
State Unit per working working Unit per working working Unit per working working
day hour per days in a day hour per days in day hour per days in a
day Year day a Year day Year

Telangana 125 8 288 55 8 288 110 8 288

Delhi 2701 9 301 1809 9 301 2298 9 302
Gujarat 1413 9 295 1363 9 295 1350 9 295
Karnataka 268 8 301 200 8 310 261 8 310
Maharashtra 2179 9 302 1557 8 288 1321 8 290
Tamil Nadu 2000 8 300 1500 8 300
Uttar Pradesh 3012 8 303 2300 8 337 11608 8 303

West Bengal 126 7 294 99 7 298 32 7 296

All India
1974 8 300 1414 8 302 3276 8 300
Average

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Table 8.6: Averages of Output, Total Sales, Cost of Production across states
2012-13 2013-14 2014-15
Total Cost of Total Cost of Total Cost of
States Total Sales productio Total Sales productio Total Sales productio
Output Output Output
Sales Value n Sales Value n Sales Value n
(No.) (No.) (No.)
(No.) (Rs. (Rs. (No.) (Rs. (Rs. (No.) (Rs. (Rs.
Lakh) Lakh) Lakh) Lakh) Lakh) Lakh)
Telangana 9600 1350 170.00 54.00 10750 9000 187.50 57.50 13000 10500 205.00 66.00
Delhi 229201 215402 241.27 164.38 242705 229561 269.27 194.88 243844 739108 308.31 246.77
Gujarat 207500 194250 35.75 19.50 222500 210500 47.75 27.00 262500 248900 51.50 40.50
Karnataka 61290 59400 54.00 46.11 64170 61100 67.90 53.90 62700 57900 68.00 57.20
Maharashtra 426237 299467 200.07 137.58 306448 296072 200.14 141.50 276197 256713 218.62 161.17
Tamil Nadu 450000 375000 2100.00 1900.00 510000 444000 2200.00 1950.00 600000 521000 2250.00 2050.00
Uttar
612779 639178 727.86 621.36 616402 642706 845.21 734.93 636162 665169 819.64 715.71
Pradesh
West Bengal 22600 23678 15.67 10.89 22849 23189 15.67 10.67 24184 22694 14.78 10.44
All India
282762 253976 280.60 223.68 268738 260664 315.26 254.64 270347 429771 329.27 274.10
Average

Table 8.7: Average Profit Before and After Tax across States
(Rs.Lakhs)
Sl. Profit Before Tax Profit After Tax
States
No. 2012-13 2013-14 2014-15 2012-13 2013-14 2014-15
1 Telangana 41.50 46.50 50.50 16.00 18.00 19.50
2 Delhi 28.75 34.42 39.42 11.08 14.29 16.96
3 Gujarat 6.75 8.75 15.00 4.75 6.50 10.75
4 Karnataka 11.60 13.90 13.40 9.00 10.50 9.40
5 Maharashtra -.91 -.82 -1.64 -1.09 -1.00 -1.82
6 Tamil Nadu 200.00 250.00 200.00 150.00 200.00 150.00
7 Uttar Pradesh 124.14 144.50 138.43 43.71 53.29 50.93
8 West Bengal 4.67 4.11 3.78 4.50 3.56 3.56
All India Average 38.48 45.25 45.27 16.12 19.69 19.44

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Table 8.8: Expenses in lieu of Interest Charges and Taxes

Sl. Interest Charge Taxes
States
No. 2012-13 2013-14 2014-15 2012-13 2013-14 2014-15
1 Telangana 5.50 5.50 6.00 24.00 27.50 29.50
2 Delhi 17.33 16.92 17.58 4.67 5.58 7.04
3 Gujarat .25 .25 .25 .00 .00 .00
4 Karnataka .80 1.70 1.80 2.40 4.00 4.00
5 Maharashtra 1.09 1.45 1.82 .36 .45 .64
6 Tamil Nadu 50.00 52.00 54.00 44.00 46.00 47.00
7 Uttar Pradesh 20.36 24.45 28.00 39.25 45.38 45.54
8 West Bengal .00 .00 .00 .33 .33 .22
All India Average 8.57 9.48 10.40 9.67 11.80 12.45

8.4 Sources of Raw material

For producing toys, majority of the manufacturing units (73%) source raw materials from
indigenous sources within the country. However, about 24% units rely on both indigenous and
imported sources for the raw material. Only a few units (2%) source raw materials from
entirely imported sources (Table 8.9. & figure 8.4).

Table 8.9: Sources of Raw Materials Used by Manufacturing Units

Sl. No. Material No. of Percent
Units
1 Indigenous 60 73.2
2 Imported 2 2.4
3 Both 20 24.4
Total 82 100

Figure 8.4: Sources of Raw Materials Used by Manufacturing Units

Both
24%
Imported
3%
Indigenous
73%

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Table 8.10: Input Related Information

(Rs. Lakhs)
Sl.
States Raw Material cost Fuel & Energy
No.
2012-13 2013-14 2014-15 2012-13 2013-14 2014-15
1 Telangana 26.00 28.50 32.00 3.50 3.50 4.00
2 Delhi 163.54 177.42 233.61 6.79 7.71 8.79
3 Gujarat 21.25 29.00 47.25 .50 .50 .75
4 Karnataka 12.10 14.80 13.80 2.00 2.90 3.00
5 Maharashtra 52.82 57.10 47.00 1.82 1.82 1.91
6 Tamil Nadu 1200.00 1250.00 1310.00 156.00 168.00 175.00
Uttar
313.14 375.29 366.64 24.29 28.71 26.71
7 Pradesh
8 West Bengal 1.44 1.63 1.67 .38 .33 .33
All India Average 138.15 159.82 172.15 9.61 10.88 11.00

8.5. Packaging of Toys

To sell their toy products, manufacturing units have adopted different types of packaging.
54% surveyed units pack their products using local materials which are followed by card board
packaging with the name of Unit (25%) and designer packaging is done by 20% units.

Table 8.11 : Different types of Packaging of Toys used by Manufacturing Units

Sl. No. Types of Packaging No. of Response Percent

1 Own Packaging using local material

64 54
2 Card Board Packaging with name of Unit
29 25
3 Designer Packaging 24 20
4 Any Other 1 1
Total 118 100

8.6. Marketing of Toy Products

For a toy manufacturing unit, after packaging, there is a need for marketing the products.
Among the surveyed units, 39% units sell their products directly to the buyers whereas 37%
producers take help of distributors and dealers network. To expand the market size, 24% units
sell product by both channels (Table 8.12).

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Table 8.12: Methods for Marketing Products in Domestic Market

Sl. No. Methods No. of Percent

Units
1 Direct Marketing 32 39.0
2 Distributor & Dealer
Networks 30 36.6
3 Both 20 24.4
Total 82 100

About 89% toy manufacturing units face competition from similar products in local market
whereas 11% firms are not in favour of it (Table 8.13).

Table 8.13: Units facing competition from similar products in local market

Sl. Particulars No. of Percent

No. Units
Units facing competition from
1 73 89
similar products in local market
Units Not facing competition
2 from similar products in local 9 11
market
Total 82 100

As far as outflows of toys from the country is concerned, only 29% manufacturing units
exports their toys to other countries whereas a majority of them (71%) does not export their
toys. (table 8.14).

Table 8.14: Units Export Toy Product

No. of Firms Percent
Yes 24 29.3
No 58 70.7
Total 82 100

Out of total export units, 54% units account 1-10% revenue in total sales followed by 17%
firms which record 10-25% revenue in total sales (Table 8.15).

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Table 8.15: Export as a percentage of Total sales of the Manufacturing Unit

Sl. No. Range No. of Percent

Respondents
1 1-10% 13 54.17
2 10-25% 4 16.67
3 25-50% 2 8.33
4 50-75% 1 4.17
5 Above75% 4 16.67
Total 24 100.00

To promote exports, 62% of the total response, use direct export to foreign buyers while 30%
export through buying house and rest of the units export through agents (Table 8.16).

Table 8.16: Methods for undertaking Export Activity

Sl. Channels No. of Percent

No. Responding
Units
1 Directly export to foreign buyers 23 62.16
2 Through Buying Houses in India 11 29.73
3 Through Agents in India 3 8.11

Total 37 100.00

There are a number of reasons why most of the toy units could not export their toy products.
Table 8.17 reports that no knowledge of export procedures (29%) followed by no help from
authorities/association (20%), and cumbersome (19%) are the major reasons for not
exporting.

Table 8.17: Reasons for not Exporting

Sl. No. Reasons No. of Response Percent
1 Cumbersome procedures 14 18
2 Low Margins 5 6
3 No help from authorities/association 15 19
4 No ISO/other Certification 8 10
5 No Knowledge of export procedures 23 29
6 Others 15 19
Total 80 100

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8.7 Government Assistance

It has been reported that about 32% of the responding manufacturing units are aware about
the Market Access Initiative scheme of Government for export promotion while only 12%
have used the facility. Similarly, 28% manufacturing units are aware about Market
Development Assistance (MDA) scheme of Government for export promotion but only 12%
have used the facility (Table 8.18).
Table 8.18: Awareness about Export Assistance Schemes
(%)

S. No. Schemes Yes No

1. Awareness about of MAI 32 68
2. Used MAI to promote export 12 88
3. Awareness of MDA 28 72
4. Used MDA to promote export 12 88

For the growth of a company the government need to provide assistance, 15% manufacturing
units requested interest rebate for all bank loan, 14% reported design & development centers
to be set-up,12% reported quality infra structure and 11% reported developing training
facilities for the industry. (Table 8.19)

Table 8.19: Areas which need Government support

Manufacturing
Categories Response Units Response
(%)
Developing training facilities for
the industry 37 11
Design and Development centre to
be set up 46 14
Quality of infrastructure 42 12
Interface with business 9 3
Labour relations 16 5
Marketing of finished poducts 36 11
Export marketing 39 11
Easy availability of capital 22 6
Interest rebate for the bank loan 51 15

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Others 42 12

Total 340 100

8.8 Competition from Chinese toys

About 90% of the respondents are facing competition from imported Chinese toy products
(Fig 8.5). The Chinese toys are reported to be about 10% cheaper than Indian toys according
to 15% of the respondents while 40% of the respondents were of the view that Chinese toys
are 10-25% cheaper.

Figure 8.5: Percentage of Units facing competition from China

10%

Yes
No

90%

8.9 Domestic Market

The perceptions of the respondents regarding various aspects of the domestic toy market are
presented in Figure 8.6 and 8.7.

According to 60% of the toy manufacturers, demand for toy products has increased in the
domestic market in the recent years (Fig 8.7). However, about 45% of the respondents have
stated that they face intense competition from imported toy products (Fig 8.8)

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Figure 8.6: Domestic Demand in the recent years

14%

Increased
26%
60% Decreased
No Change

Figure 8.7: Competitions in the Domestic Market from Imported Products

4%

19%
45% Intense
Medium
Low
32% No Competition

8.10 Marketing and Product Promotion Efforts

According to the field survey, 28% of the toy manufacturers operate websites for selling toys
online (Fig 8.8). About 90% of the respondents have attended toy fairs both national and
international (Fig 8.9).

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Figure 8.8: Units having a Website for Selling Toys Online (%)

Yes
28%

No
72%

Regarding the online marketing/advertising of the products it was found that only 7% of the
responding units having websites for selling toys online.

Figure 8.9: Units Participating in Fairs (%)

8% 1% 1%

90%

National/International Toy Fairs Expo Marts

Government Delegation Others

8.11 Innovation

Innovation is perceived as very important by almost all the responding units. The design
aspect of toy manufacturing was considered as a medium activity by 35% and high by 34% of
the responding toy manufacturers (Fig 8.10).

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Figure 8.10: Importance of New Design to the Company

4%
27%
35% Very low
Medium
High
Very high
34%

8.12 Toxic Aspects of Raw Materials

Figure 8.11 shows that 78% of the respondents are aware of the presence of toxic elements
such as Lead, Bromine, Chlorine, Cadmium etc. in the toys. The presence of toxic material is
identified through complaint or law suit according to 22% of the respondents.

Figure 8.11: Awareness about the Presence of any Toxic Elements

No
22%

Yes
78%

8.13 Profile of Toy Manufacturing Units: Traditional Segment

Majority of the traditional toy units are located in Uttar Pradesh (27%) and remaining units
are based at West Bengal (22%), Karnataka (20%), Gujarat (16%) and Andhra Pradesh
(15%). Among this, 35% units belong to registered manufacturing categories. Among the
sample units 96% belong to Small size manufacturing units whereas micro size units account
only 4%. Out of total number of units, only 16.4% are members of Toy Manufacturing
Association.
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About 96.3% of the traditional toy manufacturers are not exporting. The two important
reasons for not exporting are low margins and no knowledge of export procedures. Figure
8.12 shows that 13% manufacturing units have experienced decline in the domestic demand
of the product in the recent years. One of the reasons for this has been cited as competition in
the domestic market from the similar products.

Figure 8.12: Growth of Domestic demand in recent years

No Change
14%

Decreased
13% Increased
73%

In the era of liberalization, traditional sector is also facing competition with similar domestic
products. As 67% respondents are facing competition (Fig 8.13).

Figure 8.13: Competitions in the Domestic Market from Similar Products

No
33%

Yes
67%

Besides, 85% manufacturing units involves their family members to produce toys (Fig 8.14).
It includes their wife and children. Major sources of finance for funding your business are
private sources and self fund. Further, almost all sample units are deprived of benefit of any
scheme implemented by Central / State Government for promotion of traditional toys
industry.

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Figure 8.14: Participation of Family Members in Toys Manufacturing

15%

85%

Family Members Involved

Not Involved

Figure 8.15 show details regarding export of toys. It shows that only 22% of the responding
units are exporters of toys. The reasons for not exporting has been cited by respondents being
no knowledge of export procedures (75%) and no help from authorities/association (25%)

Figure 8.15: Export of toys

Yes
22%

No
78%

About 58% of the respondents are facing competition from imported Chinese toy products
(Fig 8.16). The Chinese toys are reported to be about 10% cheaper than Indian toys according
to 38.6% of the respondents while 37% of the respondents were of the view that Chinese toys
are 10-25% cheaper but quality is not better than Indian Products.

Figure 8.16 Percentage of Units facing Competition from China

No
42%

Yes
58%

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CHAPTER 9

CONCERNS OF THE INDIAN TOY INDUSTRY

9.1 Introduction

Indian toy industry comprises of large number of indigenous toy manufacturers and a few
leading global players. Indian Toy industry requires more organized approach to face the
challenges of global competition and raising the scale of production. Toy Industry in India is
mainly based on cottage, micro, small and medium enterprises. The toy market has two broad
segments- the “organized” segment, which represents about one-third of the market, and the
“unorganized” segment which predominantly operate on cash-and-carry basis. Dynamics of
toy industry changed with the opening up of the Indian market.

This is an opportune time to deliberate on the regulatory reforms and Governmental support
requirements to make the Toy sector as a noticeable contributor to Gross Domestic Product
(GDP) in the coming years. There is no denying the fact that the Toy sector in India presents
an attractive capital and technology investment opportunity for both domestic and foreign
investors, leveraging on the country’s vast toy market primarily due to the young age
population. Considering the demographics of India, there is huge potential to be tapped by
the Toy Industry to recapture the Indian market by producing quality and price competitive
toy products.

9.2. Toy Industry – An Overview

World Toy Business is estimated to be around US$ 85 billion ie Rs.578,000 Crores. Indian
toy business is around 0.5% of the world toy business. The potential of toy business is huge in
India with the availability of huge disposable income due to country’s demography favouring
younger population and hence large consumer base. This is a need to reposition Indian Toy
Industry under ‘Make in India’ initiative to tap this huge potential.

Toy may be defined as a scaled down replica of adult world for safe use by a child.

Toys help in:

• Understanding concepts
• Develop intellectual as well as mortar skills
• Unleash creativity
• Develop Social Habits
• Problem solving

Every type of manufacturing technology that is used to make things for grownups is also used
by the toy industry. It is important to highlight that in today’s time Children are the main
focus of Indian families. As a result, great importance is being given to the Child’s

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development and learning process with the help of toys and games. Toys also assume high
importance due to shrinking outdoor space for play like Children parks and common
playgrounds for outdoor games.

Researchers and Psychologists are of the view that the children who do not play with toys and
games are less intellectually developed than those who have used toys. Learning from these
examples, now days, most schools and parents have been seen adopting the play-way/
learning by playing method to teach children. In this way children are known to learn faster
besides achieving higher intellectual capabilities and help development of emotional and
interpersonal capabilities. Hence, toys and games help overall development of children and
help in homing our future generations. Hence, the policy intervention should be consumer
centric and the industry should focus more on selling experience than on product.

Middle class consumer size is set to grow to 600 million by 2030 from 200 million today.
India is expected to be the fifth largest consumer economy by 2025. India is the fourth-largest
economy with respect to Purchasing Power, even ahead of Germany. Size of Indian Retail
Toy Market is Rs. 3000 crores and the Organized Retail: 25 % and Unorganized Retail: 75%.

Toy products export during 2014-15 registered Rs. 328.09 crores whereas import of toys
reported Rs. 1936 crores. This shows that toy import is about 6 times more than the toy export
by India. Further, toy products imported from China accounts for more than 90% of the total
toy import during 2014-15.

Indian manufactured toys sold at retail are approximately 15% of the domestic market. Toys
made by other countries (mainly China) imported into India accounts for 85% of domestic
market.

Toy Industry is Highly Labour Intensive. It has vast potential for employment generation
especially for women. Toys are generally divided into the following sub-group: Plastic
Toys, Electronic and Mechanical Toys, Dolls, Metal Toys and Collectibles, Puzzles and
Children Board games made of Cardboard/ Paperboard, Wooden Toys and Traditional
Toys, Soft and Plush Toys and others.

Frequent dispute arise in classification of Children Games and no uniformity and consistency
in applying excise duty. Educational Board Games meant for Children below age group of 14
years, classified as Parlour Games are subjected to Excise Duty.

All kinds of toys and games manufactured in India fall under HS 9503 and HS 9504 of
Chapter 95 of the First Schedule to the Central Excise Tariff Act (“CETA”). There is a need
for reclassification of it after taking inputs from toy Industry. Central Government exempts
products falling under 9503 by way of Notification from Excise Duty. Games as referred in
HS code of Tariff Heading 9504 are those which are played predominantly by Adults in
Clubs, Parlour including gaming parlour, video parlours, Casinos etc.

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Toys and games are indispensable tools of education. Education through toys and games is an
accepted fact worldwide. Researchers have also found that toys and games stimulate 25 %
more brain synapses per neuron.

Board games require protection for children to learn and acquire skills like concentration,
memorizing, additions, deletions, interpersonal skills, social skills etc. Therefore, it is
appropriate to classify Educational Board games under 9503.

Modern Stuffed Toy manufacturing came to India in late 1980’s with Korean technical
collaborations. There were 7 factories setup from 1989 to 1996 with Korean tie ups. All were
setup with 100% Export Oriented Units (EOUs). Unfortunately most of the units closed down
by early 2000 and only 2 factories survive today.

Stuffed toy industry faces challenge in procurement of raw materials. Quality & competitive
materials are available locally, special Custom Duty concession requested for manufacturers
when importing materials. Disparity in duty rates for raw materials & finished goods need to
be addressed.

9.3. RECOMMENDATIONS

1. Uniformity of VAT for Electronic/Non-Electronic Toys.

Toys are only toys and different components, like mechanical or electronic components are
added to make them easy to use. It is a method of running the Toys. Just by using some
electronic components, they cannot be termed as “Electronic Toys” and charged different
VAT. In order to protect the Indian Toy Industry there should be uniform VAT for all toys
and rename all kinds of toys as just “Toys” without bifurcation of Toys & Electronic Toys.

2. Dampening effects of Inverted Duty Structure on the Indian Toy Industry

The Indian Toy Manufacturers have been at a disadvantage as compared to Importers. While
import duty on finished goods attracts less Customs Duty, Indian Manufacturers have to pay
more duty on imported raw materials and capital goods. This has been true to many Indian
Industries. Even though the Government of India has corrected this anomaly in many cases
where import duty was more for raw materials than the finished goods, this benefit has not
been extended to the Indian Toy Industry.

3. Promoting Indian Toys for Schools and Anganwadis under Sarva Siksha Abhiyan
(SSA) and Integrated Child Development Scheme (ICDS)
Governments, including Local Governments, are major buyers of toys under the SSA and
ICDS Schemes. As of now, toys are bought by these agencies through tender irrespective of
their origin, whether they are imported or indigenously produced. Imported toys are very
general and they are not based on the specific needs of the Indian Child. In order to protect the
Indian Toy Industry from the onslaught of imports, Government should encourage
procurement of Indian Toys for Schools and Aanganadis under SSA and ICDS Schemes.

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4. Cluster Development for Manufacturers

While there is need for bringing Manufacturers under the Cluster Scheme, there is also a need
to develop a marketing Hub in major cities for the Toy Traders like in China so that it
becomes easy for the Manufacturers to sell their products at single point. This will also allow
customers to come to this hub for buying toys and games. These hubs should have all the
modern facilities
.
5. Need for more Research & Development and Skill Development
Major Toy Makers are based in US or Europe and they rule the International market mainly
because of their capacity to bring out newer and innovative designs. Even though Indian
Industry has the potential to compete with International Brands, they lack in Research &
Development facilities. There should be efforts to setup Centers where Research on new
designs can be pursued. Human skills should also be developed in a regular and consistent
way.

6. Compliance through Self Certification

Manufacturers often complain that they feel harassed by officials from various departments
like Weights & Measurement or Central Excise. This affects the morale of the Industry and
Trade. There should be a mechanism wherein the entrepreneurs comply with various rules and
regulations by self certification as has been envisaged in the Startup India Action Plan.

7. Simplification of Standards set by BIS

BIS is considering standards for Indian Toys and Games Industry. Even when the Industry is
all for producing safe and quality toys for the Indian Child, the industry should get enough
grace period to prepare for the same.

THREE INDIAN STANDARDS- Introduced by BIS as follows:

 IS 9873(Part 1):2012 / ISO 8124-1:2009 Safety requirements for toys: Part 1 Safety
aspects related to mechanical and physical properties (first revision)
 IS 9873(Part 2):2012 / 8124-2:2007 Safety requirements for toys: Part 2
Flammability requirements (first revision)
 IS 9873(Part 3):1999 - Safety requirements for toys: Part 3 Migration of certain
elements (first revision)- Based on ISO 8124-3
While the above standards, are suitable for the Indian market. The Foreign Buyer wants the
Indian Exporter to get the Toy certified by an agency giving EU-EN 71 or the American
ASTM-F963-11 Standards. Unfortunately BIS standards do not confirm to EU-EN 71 or the
American ASTM-F963-11 Standards. BIS should get themselves accredited to EU-EN 71 or
the American ASTM-F963-11 Standards unless this is done the foreign buyer will not accept
BIS standards.

8. Indian Metrology Act (Weights & Measures Act) – Discrepancies arise from the
interpretation of the law, which varies from the officer to officer. Template: 20 to 30
templates for all products in all categories under all chapters (including toys in chapter 95).
This could be in a handbook. B) Registration of case: C) MRP put by Retailers/ others.

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9. Central Excise & Custom Duty - Central Excise interpretation under chapter 95.03 &
chapter 95.04. Although Toys are exempted from Central Excise, Toy Components are
excisable, thereby increasing the input costs & making the Indian product less competitive
with the imported ones. The import duty on complete toys is far less than component of toys,
which completely defies the logic of promoting the “Make in India”.

10. C-form issues – Compliance of this law takes precious time & energy besides it leads to
harassment by officials.

11. Technology Up gradation: Promote use of new technology in the manufacturing sector.
Provide higher rate of depreciation @ 20-25% & lower tax rate, coupled with CLCS. Cheaper
loans to be provided by SIDBI, other Banks, etc. CLCS (Credit Linked Capital Subsidy) for
Technology Up-gradation only assures 15% upfront capital subsidy, which, in our opinion, is
not sufficient.

12. Taxation Benefits: Toys play an important role in the overall development of the child. It
enhances their motor skills, ignites spark in creativity and helps enhance the overall
development. Exemption or Lower rates of taxes Abolition of multiple taxes like Octroi, LBT,
etc. lower rate of GST, unification of all toys & games as one, including electronic. Tax
holiday for 2-4 years will help manufacturers recover relocation costs. VAT / GST at lowest
rate request you to keep Toys out of the complicated tax laws. Presently, many manufacturers
are troubled with multiple tax structures like VAT/ Octroi/ LBT/ CST/ etc.

13. Quality Standards: Use a standard that is widely accepted in the world, like the EU-EN
71 or the American ASTM-F963-11. Recommended that the part 3 (dealing in toxicity) of the
IS 9873/ EN 71-Part 3, be implemented, both for imports & domestic manufacturers. This will
ensure that the cheaper toxic toys do not enter the country Removal of clause 5 b & c and the
term “Reason to believe”. This will be a grey area and a cause for the lobbying fraternity.
Implementation of the standards in a phased manner. .

14. Toy Design Centre (TDC) – Toy Design Centre could be a good solution, where new
designs could be made and offered to the Toy Industry Manufacturers. Use of a design
institute like NID / IIT/ NIFT, Full package service, from design to patent & legal support.
Competitive pricing.

15. Cluster & Relocation benefits – Toy Manufacturers are concentrated in two major areas,
Delhi & Mumbai. Loans at subsidized rates for companies coming into cluster. Above
applicable for relocation as well lower rate of loans for the Toy Sector is suggested.

16. Capital Support for manufacturers

It is proposed that the present credit limit of Rs. 1 crore available under Credit Guarantee
Trust for Micro, Small and Medium Enterprises without collateral (unsecured) may be
increased to Rs.3 crores since the cost of machinery and technology has gone up substantially
in the recent years. It is proposed to have rate of interest may be around 6-7% per annum (or
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about 1% more than the prime lending rate). The processing time may be fixed within 90
days.

17. Government Support:

A) Quality check & control on all imported Toys & Games, “To ensure that there is same
quality compliance as the Indian Manufacturers”.

B) Promotion of Toys & Games – Educating the Indian Consumer: It is usually seen that the
price point is noted, not the play factor, which is of most important. If the GOI could use the
Make in India platform to encourage the consumers to purchase Indian Manufactured toys,
this would have a far reaching effect as well.

C. Trade meets & exhibitions) GOI helps the Toy Industry by collecting data bank of the Toy
Quality check at point of import Products that fail may be destroyed/ scrapped at point of
import Seminars in schools with children & parents Government support Hiring of agency to
help grow market.

18. Big Leap Help (Bulk Orders)

Backing to a company, consortium or cluster to execute a huge order out-sourced to the Toy
Industry. Legal guidance for the same .Government backing incase of delays in the payment,
cancellation of order, etc. Every manufacturer who successfully comes through should help
one other manufacturer/ cluster. Others include MSME scheme re-imbursement process
simplified. Subsidy for one domestic & one international exhibition already in existence help
with simpler documentation MSME schemes excellent, help with Single Window

PROBLEM AREAS, ACTION PLAN AND IDENTIFIED BENEFITS

S Problem Areas Suggested Action Benefits

.No.
1 Weights & Measures • Template formation. • More effective
(Indian Metrology Act) implementation.
• Transfer of case to • Lesser violation of the
(CENTRAL Manufacturer’s law, hence reduction in
GOVERNMENT) hometown. legal matters.
• Huge reduction in the
• Violation by lobbying tactics.
downstream vendors • Lesser mental stress and
should not be blamed better working efficiency.
on the manufacturer.

2. Central Excise • Clarity in the • Effective compliance.

definitions u/s 95.03
(CENTRAL • Exemption for Toys & • Reduced burden on the
GOVERNMENT)
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Games. Industry
• Components exempt
from excise • Better growth rate.
• Import duty on
components be less
than complete toy.
3 C-form issues • Online registration of • Smarter process.
vendors
(CENTRAL • Quarterly statements • Simple implementation,
GOVERNMENT) should be mapped hence faster assessments
online. • Lesser paperwork, better
• C-form issue & efficiency
submission eliminated.
4 Technology up gradation • Promote use of new • Better efficiency
technology in the
(CENTRAL manufacturing sector.
GOVERNMENT) • Provide higher rate of • Improved productivity &
depreciation @ 20- quality
25% & lower tax rate,
coupled with CLCS.
• Cheaper loans to be • More competitive pricing.
provided by SIDBI, • Increased exports & better
other Banks, etc. reach in the Indian
market, hence lower
imports.
5 Taxation benefits • Exemption or Lower • Lower taxes = competitive
rates of taxes pricing
(STATE • Abolition of multiple • With competitive pricing,
GOVERNMENT) taxes like Octroi, more chance of
Urban Local Body Tax recapturing the market
(ULBT), etc. lower share, thereby reducing
rate of GST, imports.
unification of all toys
& games as one,
including electronic. • Prices will get competitive
• Tax holiday for 2-4 & sales will raise, hence
years will help collection on VAT/GST
manufacturers recover will compensate.
relocation costs. • Presently Toys are
exempted from Ce. Ex,
• VAT / GST at lowest VAT in 90% states or it is
rate 5% or less, hence Toys &
Games should come in the
lowest GST bracket.
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6. Quality Standards • Removal of clause 5 b • Safer & better toys would

& c and the term be available to the
(CENTRAL “Reason to Believe”. children of India.
GOVERNMENT) This will be a grey
area and a cause for
the lobbying fraternity. • Elimination of health risk.
• Implementation of the
standards in a phased
manner. • International compliance
• Use of common in the quality, hence fall in
standards for India & the imports.
EU, etc. Any one. • Domestic Industry gets a
boost
• Common standards would
eliminate dual testing
requirement.
7. Toy Design Centre • Use of a design • New designs & not
institute like NID / IIT copies, hence better
(CENTRAL/ STATE recognition
GOVERNMENT) • Full package service, internationally.
from design to patent • Design students get first
& legal support. hand practical knowledge
& experience
• Competitive pricing.
• With the IPR matter being
handled by the institute,
there is no personal/
internal clash amongst
members.
8 Cluster / Relocation • Toy Manufacturers are • Good locations should be
benefits concentrated in two provided near these
major areas, Delhi & concentrated centers if
Mumbai. cluster is to be successful.
• Loans as 6% PA & below
• Loans at subsidized will attract manufacturers
rates for companies (or Inflation + 1%).
coming into cluster. • Increase in amount from
1cr to 3 cr is suggested,
depending on the
company & its turnover/
profitability.
• Provide same benefits to
• Above applicable for companies relocating,
relocation as well being asked to relocate in
case of countries progress

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(Govt. construction, road

widening, etc.)
9 Government Support • Quality check at point • Will provide level playing
of import field to the Indian
(CENTRAL / STATE Manufacturers
GOVERNMENT) • Products that fail be • Consumer benefits as safe
destroyed/ scrapped at products are available
point of import
• Seminars in schools • Impact on imports
with children &
parents • Educate children &
• Government support parents on how to choose
apt product for the apt age
group.
• Increases knowledge of
• Hiring of agency to impact of toys in overall
help grow market. growth.

• Benefits of Toys in child’s

development.
• Will have a positive
• Use the Indian impact on the industry
Embassy to create • Expose quality products
international data bank from India to the
and hold Toy Trade international market
Meets/ Mini
Exhibitions to promote
Indian Toys
10 Big Leap Help (Bulk • Backing to a company, • Smaller players in the
Orders) consortium or cluster industry will be
to execute a huge encouraged to grow.
order being out-
sourced to them.
• More employment
• Legal guidance for the generated.
same. • Economies of scale in
favor, manufacturer
• Government backing encouraged to take more
incase of delays in the such orders.
payment, cancellation • Better relations amongst
of order, etc. manufacturers, laying the
foundation for a cluster
• Every manufacturer formation, better
who successfully coordination, etc.

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comes through should

help one other
manufacturer/ cluster.
11 Others • MSME scheme re- • Simple one-time
imbursement process registration & bi-annual
simplified. updates will encourage
manufacturers to take
• Subsidy for one benefits.
domestic & one • Encourage manufacturers
international to go international
exhibition already in
existence, help with • Increase exports from
simpler documentation India

• Promote Brand India

• MSME schemes are
excellent but • Help encourage
manufacturers need manufacturers to use the
Single Window scheme with simpler
support procedures.

• Single window to help

expedite paperwork and
procedure.

• With faster re-

imbursement, build
hunger to take calculated
risks and stimulate
growth.

• Single window can be

given on a subsidized
charge per manufacturer,
depending on profitability:
1000/- to 10,000/- per
annum.

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CHAPTER 10

SUMMARY, RECOMMENDATIONS AND WAY FORWARD

10.1. Summary

India has a rich heritage in toys. Toys act as cultural ambassadors reflecting 5000 years of
Indian civilization. The Indian toy industry is estimated to be worth Rs 1,700 crore of which
10% constitutes organized market and 90% constitutes unorganized market and growing 15-
20% a year. According to a Euromonitor study, spending on toys and games in India is set to
grow at 157% between 2009 and 2014, much faster than other Asian countries such as China
(84%), Taiwan (35%), South Korea (33.1%) and Singapore (17.2%). Indian parents spend an
average of Rs 250-300 on a toy and this is going up more and more innovation-driven high-
end toys and games - from high-priced board games and play gyms to BeyBlades and remote-
controlled planes - enter the market. Uuntil now has generated only 0.5% of the global toy
market.

Indian toy industry comprises of large number of indigenous manufacturers and a few leading
global companies. The toy industry is mainly based in the small and cottage sectors, with
about 4000 manufacturers. The toy manufacturers are mostly located in Delhi, Mumbai,
Punjab, Uttar Pradesh, Haryana, Tamil Nadu and clusters across central states. The toy market
has two broad segments- the “organized” segment, which represents about one-third of the
market, and the “unorganized” segment. Mom-and-Pop shops (also known as “Kirana”) are
mainly “unorganized” outside the main urban centers, and predominantly operate on a cash-
and-carry basis. The “organized” stores are in the big cities – mainly toy specialty stores such
as RCS in New Delhi, Hamleys in Mumbai or Prijanka in Hyderabad. Some large MNC toy
manufacturing units like Mattel and Funskool have their presence in India. Funskool Toys is
the largest toy producer in India with 30% share, followed by Mattel (20%), Hasbro (9%),
Bandai (4%) and Lego (4%) and Leap Frog (3%) and the others accounts for about 30%. The
online toy market, represents a mere 5% though growing rapidly, is unlikely to have a major
influence on the overall demand in the next couple of years. India is producing quality toys,
which is unmatched elsewhere and therefore, the demand for Indian toys is rising by leaps and
bounds. However, dynamics of toy industry changed with the opening of the market for
Chinese players, Chinese toys are destroying the Indian toy industry and small and medium
manufacturers are almost on the verge of collapse. Nearly 2000 SMEs have closed so far in
the last 4-5 years and about 20% of the toy industries are on the verge of closure with the rise
in imports from China and Italy.

The productivity levels of the sector are estimated in terms of Labour productivity, capital
productivity and total factor productivity during 2008-09 to 2012-13. Average of capital
productivity growth reported negative growth. However, labour productivity growth reported
positive growth for these 5 years at 13.31%. this indicates that increase in capital formation
requires to make on continuous basis to provide impetus for TFPG of Toy Industry in India.
The estimated partial productivity growth for both labour and capital as well as total factor

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productivity growth indicates that technology played a significant role in the productivity
growth of Toy sector in India. Technology upgradation schemes are vital to make toy sector
more productive and competitive in the globalized setting.
Inspite of double digit growth, Indian toy industry is much backward in comparison to
China’s toy industry. Captivating the advantage of the raw materials and cost of labor, China
has become the largest manufacturer and exporter of toys in the world. It is estimated that
about 75% of toys worldwide is made in China. According to China Toy and Juvenile Product
Association, China’s toy exports totaled US$ 26.34 billion in 2014.

With the lowering tariff barriers, melting of international trade boundaries, the domestic
market is now open and the Indian industry are facing the challenges from the domestic
distributors and multinational competitors who imports cheaper products mainly from China.
Only 20% of the Indian market is served by Indian toy manufacturers while the rest by import
of toys from different countries mainly from China and Italy.

However, export from India to world has increased by almost 4 times out of which India’s
exports of toys to China is even less than 1%, but imports have increased by more than 14
times, of which 77% is imported from China during 2002-2014 period. This leads to
declining trade ratio which suggests that India’s global competitiveness with respect to toy
products are going down year after year.

10.2. Recommendations

Though the heritage of the Toy Industry in India is rich, it is struggling to remain competitive
especially against imports and requires a lot of protection and encouragement by way of
Upgrading existing technologies, R and D, Designing, Toy Safety norms etc. It has
tremendous scope and potential for expansion in exports as well as in the domestic markets.
All policy recommendations suggested in this report are formulated after having detailed
interactions with the industry experts and Toy Association. The Toy Industry in India is in
urgent need of the following proposals:
• Template: Since the Weights and Measures Act has been a major cause of
inconvenience to the toy industry, right from manufacturers to the retailers, a set
format of template need to be developed which could be used as a reference when the
case is being registered. This will ensure that no officer plays mischief only to trouble
the manufacturer. (Presently, the law is written in a descriptive manner and this is
interpreted by different officers in different manner. Once the template is finalized,
there is no confusion and implementation and understanding of the law is simplified.)
Once the case is registered, it would send a signal to the manufacturer too that there is
some discrepancy, which he/ she can then understand and rectify.
• Registration of cases: The registration of the case should be done in the home city/
town of the manufacturer, or where the H.O. is located, instead of the city/ town where
the violation is caught. Eg: if the case is registered, say in Patna, and the manufacturer
is in Mumbai, then if the manufacturer wants to challenge the case, he has to travel to
and fro from Patna. The cost involved in the travel/ stay/ incidental expenses is many
times more than the fine, hence being from the business community, it makes sense to
accept the violation rather than challenge the same. The cost multiplies every time the
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case is delayed. This leads to rampant corrupt practices. This can be avoided if the
case is registered as per paragraph a) and then transferred to the home city of the
manufacturer, along with the evidence. This will ensure that the manufacturer, mostly
from the MSME sector, is not inconvenienced and can follow the laws more correctly.
• MRP put by Retailers: Another problem faced by manufacturers is that although
they follow norms, if the retailer/ middleman alter the MRP at his level, the
manufacturer is blamed and tried for the same. It is un-ethical so it should be very
clearly defined. If the manufacturer has placed all details as per template, then any
additional MRP sticker put up by the retailer should be the sole responsibility of the
retailer.
• Central Excise: The toy industry would benefit if the clarity in the law is given and
the grey areas removed. It is in the best interest of the children of India that all Indian
Manufactured Toys and Games be exempted from Central Excise. This would make
them more competitive and help reduce dependency on imported toys. Toys and
Games are essential for the overall growth and development of Children.
• Quality Standards: Toy association need to be asked to ensure that the manufacturer
produces the quality certificate within 1 month and a provision should also be made to
reimburse the manufacturer for the fees paid to test the quality of the products.
• Toxicity: It is highly recommended that the part 3 (dealing in toxicity) of the IS 9873
be implemented, both for imports and domestic manufacturers. This will ensure that
the cheaper toxic toys do not enter the country, and the domestic quality
manufacturers do not face competition from sub-standard products. This will reduce
the import volumes by a huge margin, if it is strictly adhered too. It is suggested that
initially only two ports be allowed to handle toys, Mumbai and Chennai. It would be
easier to control and implement the quality check. Thereafter, other ports could follow
suit once the systems are in place. There should be Quality check and control on all
imported Toys and Games as it will reduce the dumping of toxic/ rejected toys from
around the world into India. To ensure that the control is maintained, only 2-3 ports
could be designated/ allowed to import Toys. This will result in complete control
initially. Other ports could be equipped in the future. Also, place to destroy those toys
which fail the tests should be made available, like in the EU or USA.
• Technology Up gradation: With the Government of India now assisting the
manufacturing sector, specially the MSME, technology of toy industry need to be
upgraded. New technology will bring with it better efficiency, hence better
productivity and quality. However, all these come at a huge capital cost, which is a big
deterrent. If some subsidies are made available, it would be of huge help. One
suggestion from a senior member of toy industry is as follows: If 10% of the total
profits is re-invested in technology up gradation/ adaptation, income tax benefits of up
to 10% be made available.
• Toy Design Centre (TDC): R&D in the Indian Toy Industry is negligible. The main
deterrent being huge capital cost and smaller life, as new designs are easily copied
with least IP protection. A Toy Design Centre could be a good solution, where new
designs could be made and offered to the Toy Industry Manufacturers. This will

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ensure that there are no copies and the TDC, being a nodal independent body, will
ensure that their ideas/ designs are not copied by others.
• Taxes/Octroi/ GST: Toys play an important role in the overall development of the
child. It enhances their motor skills, ignites spark in creativity and helps enhance the
overall development. The benefits are enormous. So it is suggested to keep Toys out
of the complicated tax laws. LBT/ Octroi should be abolished and help keep toys in
the lowest rate of VAT/GST.
• Elimination of C-forms: Since the C-form collection and submission is a tedious
task. Problems related to this can be avoided by simplifying the procedure. The
submission of C-forms can be eliminated. A suggestion is given as follows:
Every manufacturer gets a VRF (Vendor Registration Form) filled by the client/
dealer. The details could be uploaded online. This could then be mapped with the
client when he uploads the summary. Individual invoices/ summary could be verified,
when a doubt arises or at random checking/ annual filing of returns certified by the
CA. Only those clients registered by the manufacturer on the site will have the
transactions cleared. For other clients, 30 days time be provided to upload the details,
else the transaction be treated as URD (Un Registered Dealer) and VAT be imposed
(at say 5%). The transactions could be system generated and completed, thereby
eliminating any human interference and eliminate lobbying.
• International Promotion: With the help of the Indian Embassies, Trade meets and
exhibitions need to be organized. This would expose the Indian manufacturers and
their products to the international consumer and help increase bi-lateral trade.
• Transportation: The use of way forms for transport of goods into various states is a
huge deterrent to many dealers. The system could also be made simple and online, so
that the interaction between the government body and manufacturer is eliminated. This
would help the traders as well as the manufacturers in faster processing the orders and
deliveries of the goods.
• Tax Holiday: The Government of India removes various Tax Holiday schemes for
various backward areas, in order to develop them. Since the toy industry is struggling
it could be considered for a tax holiday. If a tax holiday, including MAT, is removed
for only Indian Owned Toy Companies, it would be a morale booster for all.
Manufacturers would then also be encouraged to invest in R&D, new machinery and
technology, seeing the benefits they can garner from it.
• Knowledge Upgradation of Industry Stakeholders: It will be in the interest of the
industry if manufacturers could be educated on the payment procedures/ recovery
procedures through interactive meets. A single window clearance for existing and new
projects/ technology upgrading, etc, would also be beneficial.

Chinese Government supported its Toy Industry in the 70’s and 80’s. The result today is that
over 75% of the toys in the world are China sourced. The needs and requirements mentioned
above will help boost the Indian toy manufacturing community, most of them are either Tiny
Industry or in the MSME. Toy Industry is an extensively labor oriented industry. Hence
when the Toy Industry grows, they will hire more people, hence will also serve the nation by
helping in reducing the un-employment rate.

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10.3. Way Forward to Meet Emerging Challenges on Productivity & Competitiveness

More than 30% of working capital in a typical manufacturing industry is spent on energy
charges. Thus, to enhance the cost competitiveness of the finished goods, Energy Audits of
the units of a company will get benefited, as there is a potential of saving of 15 to 20%
(approx) in each manufacturing unit.

The ambit of productivity can be extended to other operations of the industrial unit by
conducting Productivity Audit. It will help the organizations to set baseline productivity levels
and track productivity improvements. Experienced consultants can further enhance the
efficiency and effectiveness of the management & other resources by identifying the most
promising areas for productivity improvements and reducing wastes.

Material Flow Cost Accounting (MFCA) aims to reduce both adverse environmental impact
as well as reduce costs and increase profitability. It is a tool used in organizations decision-
making which is aimed at improving their business productivity by accounting for all inputs
reducing costs through waste reduction. It focuses on identifying & differentiating between
costs associated with products and “material” losses and differs from conventional
accounting. It will be useful in costs being competitive so as to compete globally and serve as
benchmarks.

Lean Production & Office Management is an approach that includes a set of management
practices which work synergistically to create a high quality system for reaching customer
demand with no waste. Lean applies in every business and every process. It is not a tactic or a
cost reduction program, but a way of thinking and acting for an entire organization. It includes
identifying 7 Wastes, solving them through adoption of 5S, 6 Sigma, Just In Time (JIT),
quality systems, work teams, cellular manufacturing, and supplier management, etc. Certified
trainers in the Basic and Advanced courses on Productivity Practitioners can assist creating an
ethos and culture of productivity and consciousness by training a cadre of trained
professionals. They can be trained in each unit through various Skill Development Schemes.

Maintenance figures significantly in operating costs in an organization. It is considered as a

main pillar of the organizational performance. Preventive and Predictive Maintenance can be
incorporated into maintenance activities. Consultancy support for which strategy to apply
based on disruption due to equipment downtime, cost of parts and labor time, and equipment
history can be obtained. It will also enhance the safety consciousness in the organization.

10.3.1. Industry 4.0: Next Industrial Revolution and the possibilities

Industry 4.0 or the Fourth Industrial Revolution as it is called, is emerging globally as a

powerful force and is being touted as the next industrial revolution. It is characterized by the
increasing digitization and interconnection of products, value chains and business models.
Industry 4.0 would mean the convergence of real and virtual worlds - the next phase in
bringing together conventional and modern technologies in manufacturing. This will result in

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the “Smart Factory”, which is characterized by versatility, resource efficiency, ergonomic

design and direct integration with business partners.

Industry 4.0 is one of the major drives of the Fourth Industrial Revolution. The first industrial
revolution was triggered by water and steam power to move from human labor to mechanical
manufacturing. The second industrial revolution built on electric power to create mass
production. The third used electronics and information technology to automate
manufacturing. The fourth is the current trend of automation and data exchange in
manufacturing technologies.

Manufacturing today is cutting edge and requires a high level of skill. Today, the global
manufacturing sector is undergoing a structural transformation. Though India banks heavily
on its Service Sector for growth, the Manufacturing Sector needs to play a significant role in
the Indian economy The Manufacturing Sector especially MSMEs play a pivotal role in the
Indian economy and provide the largest share of employment after agriculture. In order to
converge the aims of growth with employment it is important to increase the share of
manufacturing in the country’s Gross Domestic Product from 16% to 25% by 2022 and to
create 100 million additional jobs by 2022 and Industry 4.0 can play major role in achieving
these targets.

Industry 4.0 brings in the following benefits:

• Lower Cost
• Additional Revenue
• Enabling Industrial Companies to optimize customer relationship.
• Transparency in the production process
• Clarity on the status of all aspects of production system in real time
• Logistics processes becomes leaner
• Reduced inventories
• Maintenance processes standardization
• 100% traceability
Industry 4.0 is driven by an amalgamation of emerging technologies like
• Sensors
• Additive Manufacturing – 3D Printing
• Augmented Reality
• Industrial Internet
• Cloud Computing
• Simulation
• Robots (auto + Cobots)
• Big Data & Analytics,
• Horizontal & Vertical Integration
• Cyber Security

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However, there are many challenges which have to be addressed in order to successfully
adopt advanced technologies and realize Industry 4.0 potential in the sector. Few key
challenges are given below:

• Fostering a strong digital culture of linking production to markets

• Data Security: The major risk with recording, storage and analysis of large volumes of
customer data is the inappropriate use of the said data
• The option for adoption of various technologies will have to be assessed in terms of i)
Competitiveness in terms of customer – valued advantage ii) compatibility with
existing systems iii) Feasibility iv) Impact and v) Risk.

The approach, use of technologies etc for successful implementation of Industry 4.0 may
differ from one sector to another. Energy intensive sectors such as Iron & Steel, Pulp & Paper
etc may adopt sensor based Energy savings solution to provide dynamic information about
energy consumption & cost whereas other sectors such as Toy Industry may adopt 3D
printing in order to optimize design development activity.

Various initiatives are being undertaken by Government of India and other stakeholders in
order to realize successful adoption of Industry 4.0 technologies / concepts such as New
Industrial Policy which includes Industry 4.0 highlights, establishment of Centre of
Excellence on Industry 4.0 etc which will expedite the dissemination of technologies to
“Make in India”. The adoption of appropriate and relevant Industry 4.0 technologies can also
be incentivized to ensure speed and scale for mass adoption. The critical standpoints of do-
ability (time frame), feasibility as per infrastructure and viability (in financial terms) will have
to be assessed to enable frugality and value for money in adoption rather than mere copying
high cost technologies which are labour displacing.

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ANNEXURE 1.1
SURVEY QUESTIONNAIRE FOR TOY MANUFACTURING SECTOR
Company/Manufacturing Unit: Modern Toy Sector
National Productivity Council, under Ministry of Commerce and Industry, Government of India, is carrying out
a nationwide research study on Productivity & Competitiveness of Toy Manufacturing Sector in India as a
part of XII Plan Project. The objective of this study is to identify and understand major concerns and issues
faced by the sector in terms of productivity, employment, value addition, domestic and export competitiveness.
The study is expected to come out with specific recommendations to facilitate policy formulation by Government
of India to enhance productivity and export competitiveness of the Toy Manufacturing Sector in India. The
information/data provided would be utilized exclusively for the study purposes and would be kept confidential.

(Please fill as per instructions given with each question)

Write codes/ values in the box provided at the right hand side)
1.0 General Information
1.1 State Code :
(1=Telangana, 2=Delhi, 3=Gujarat, 4=Karnataka, 5=Maharashtra, 6= Tamil Nadu , 7=Uttar Pradesh,
, 8=West Bengal)
1.2 Product Category:
(1= Soft toys, 2= Metal toys, 3= Plastic toys, 4=Educational toys, 5= Mechanical toys, 6= Computer
games, 7= Wooden toys, 8=Vinyl toys, 9=Others)
Company Name & Address: _____________________________________________________________
1.3 Contact Person:________________________________________________________________
Telephone No: Landline_____________________________Mobile:_______________________________
E-mail address& website if any:____________________________________________________________
1.4 Year of Establishment
1.5 What is the category of your company?
(!= Micro, 2= Small, 3=Medium, 4=Large,)*
1.6 Whether your company registered? (1= Yes, 2=No)
1.7 Does your organization have Quality Accreditation, like ISO 9000, HACCP etc?
(1= Yes, 2= No)
1.7.1 If yes, please specify the standards/ accreditation: (1=ASTM F963, 2=ISO8124 (parts I-III),
3=IS9873 (parts I-III), 4= Any other please Specify _______________________________________
1.7.2 Has the standards/ accreditation helped in boosting business growth/ demand for the products?
(1= Yes, 2=No)
1.8 Are you a member of any Toy Manufacturing Association? (1= Yes, 2=No)
1.8.1 If yes, please specify the name of association:

2.0 Input Related Information

2.1 Employment & Capital Investment
Years Skilled Un Skilled Wages & Capital Investment
workers workers Salaries (Book Value)
(Number) (Number) (Rs. Lakhs) (Rs. Lakhs)
Male Female Male Female
2012-13
2013-14
2014-15
2.2 Capacity Utilization of the Unit per day
SL.No Category Unit per day Average working No. of working days
hour per day in a Year
1. Installed Capacity

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2. Capacity Utilization
3. Idle Capacity
3.0 Trade Related Information
3.1 Details related to production, Manufacturing practices & marketing
Years Output Total Sales Total Sales Value Cost of Production Rs.
(Number of ((Number of unit) (Rs. Lakhs) Lakhs)
unit)
2012-13
2013-14
2014-15
3.2 Financial Information
Sl.No Particulars 2012-13 2013-14 2014-15
1 Profit before tax
2 Profit after tax
3 Raw Material cost
4. Fuel & Energy
5 Interest Charge
6 Taxes
3.3 Source of raw material
(1= Indigenous raw material, 2= Imported raw material )
3.4 Packaging of toys: (1= Own packaging using local material , 2= Card board packaging with name
of unit, 3= Designer packing, 4= Any other)
3.5 Kindly indicate the methods followed for marketing products in the domestic markets :
(1= Direct marketing, 2= Distributor & Dealer network)
3.6 Do you face competition from similar products in local market? (1= Yes, 2=No)
3.7 If yes, What are the measures taken to overcome it?
______________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
3.8 Do you export toy products?
(1=Yes, 2= No)
3.8.1 If No, reasons: 1) Cumbersome 2) Low margins 3) No help from authorities/association 4) No ISO/
other certifications 5) No knowledge of export procedures 6 ) Others specify ___________________
3.8.2 If yes, what is the percentage of your Export in your Total Sales
(1-10%, 10-25%, 25-50%, 50-75% Above 75%)
3.9 How do you undertake export activity? (1=Directly export to foreign buyers, 2=Through buying
houses in India, 3=through agents in India, 4=Others (specify)_______________________________
3.10 Data on production and foreign trade during last three years.
Years Export (Rs. Lakhs) Import (Rs. Lakhs)
2012-13
2013-14
2014-15
3.11 Please mention your export destinations
3.11.1 Product Description Countries you are exporting to:
1.Soft toys
2.Metal toys
3.Plastic toys
4.Educational toys
5.Mechanical toys
6.Wooden toys
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7.Vinyl toys
8.others
3.12 Are you aware of Market Access Initiative(MAI) scheme of Government for export
promotion (1= Yes, 2=No)
3.12.1 Have you ever used MAI to promote your export? (1= Yes, 2=No)

3.12.2 If yes, please give details:

3.13 Are you aware of Market Development Assistance(MDA) scheme of Government for export
promotion (1= Yes, 2=No)
3.14 Have you ever used MDA to promote your export? (1= Yes, 2=No)

3.14.1 If yes, please give details _______________________________________________

3.15 Have you ever utilized following incentive schemes: (1= Duty Drawback, 2= EPCGS (Export
Promotion Capital Goods Scheme), 3= Export credit, 4= Any other(specify))
4.0 Competition from Chinese Toy Products
4.1 Are you facing competition from toy products from China? (1-Yes, 2=No)
4.1.1 If Yes, how would you compare quality of your products with Chinese products?
(1= Quality is better than Chinese products, 2=Quality same as Chinese products, 3. Quality is
lower than Chinese products, 4=Any other (please specify)
4.2 China scores over India in terms of: (1= Cost, 2= Quality, 3= Innovation, 4= Others)
4.3 How much cheaper are Chinese toys as compared to Indian toys?
(1= <10%, 2=10-25%, 3=25-50%, 4= >50%)
4.4 In which of the following categories do Indian toys have an overall advantage over Chinese
toys? (1=Plastic & Soft Dolls, 2=Plush/Stuffed Toys, 3=Board Games/Puzzles, 4=Educational
Games & Toys, 5= Wooden Toys, 6= Metal/ Tin Toys, 7=Electronic Toys/Games, 8=Collectibles
and Stationary items converted into playthings.)
4.5 What are the major areas of Price Advantage for China? (Please choose a number between 1-5
where 1=Least advantageous and 5=Most advantageous for China) please circle your choice
Wages 1 2 3 4 5
Infrastructure 1 2 3 4 5
Quality of Manpower 1 2 3 4 5
Subsidy 1 2 3 4 5
Network Clustering 1 2 3 4 5
Undervalued Currency 1 2 3 4 5
FDI 1 2 3 4 5
Health care facilities 1 2 3 4 5
Environmental factors 1 2 3 4 5
4.6 Suggestions for Tariff structure in India to compete with China

4.7 Suggestions for Restricting Dumping of toy products from China

5.0 Domestic Market Related Information

5.1 Domestic demand for your products in the recent years (1=Increased, 2=Decreased, 3=No
Change
5.2 Competition in the domestic market from imported products? 1=Intense (>50% market share
imported toys),2= Medium (25-50%), 3=Low (0-25%),4= No Competition
5.3 Major issues faced domestically: (Please rank your views on the sources of price advantages for
China on a scale 1 to 5 where 1=Least area of concern and 5=Major area of concern)
Procurement of land for expansion 1 2 3 4 5
Labor, Skilled, unskilled 1 2 3 4 5

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Wages
Labor laws or any other aspect 1 2 3 4 5
affecting labour efficiency
Technology Up gradation 1 2 3 4 5
Finance 1 2 3 4 5
Taxation 1 2 3 4 5
Procurement of Raw material, 1 2 3 4 5
Designing, Testing
Marketing 1 2 3 4 5
Logistics 1 2 3 4 5
Working Capital 1 2 3 4 5
Availability and quality of 1 2 3 4 5
basic infrastructure
Govt. Assistance 1 2 3 4 5
Toxicity in raw materials 1 2 3 4 5
Any other issues…………… 1 2 3 4 5
6.0 Marketing and Promotion Efforts
6.1 Please mention the marketing channels currently being used (1=Electronic Media, 2= Print
media, 3= Online , 4= Word of mouth, 5= Others (Pl Specify)
6.2 Do you own a website for selling toys on line (1=Yes, 2= No)
6.3 Please mention the share of marketing and advertisement cost in total cost.
(1= Zero, 2= 0 – 3 %, 3= 3 – 5 %, 4= more than 5 %)
6.4 Have you ever participated in any of the following
(1= Toy Fairs (National/International), 2= Expo Marts, 3= Government Delegation, 4= Any other
(please specify______________________________
6.5 Effect of E-commerce on Your Total Sales? (1=Increased; 2=Decreased; 3= No Impact)
6.5.1 As a Manufacturer, How Much of Your Sales is Routed through E-commerce?
(1=<15%; 2=15-30%; 3=30-50%; 4=50%+)
6.5.2 As a Distributer, How Much of Your Sales is Routed through E-commerce?
(1=<15%; 2=15-30%; 3=30-50%; 4=50%+)
7.0 Innovation by the Company
7.1 Type of design or innovations in your company (Choose one or more):
(1=Technology innovations, 2=New Product development, 3=Production/process
innovations,4=Marketing 5=Others (pl specify) ____________________________________
7.2 Sources of product design and innovations in your company?: (1=In-house R&D and innovation
processes, 2=Suppliers, 3=Customers/buyers, 4=Employees, 5=Media 6=Others (pl specify)
7.3 R&D Costs as Percentage to Total Manufacturing Costs:
(1=Less than 5%; 2=5 -10%; 3=10-15%, 4=15% & above)
7.4 Importance attached for the adoption of new designs to your company
( 1=Very low,2= Medium, 3= High, 4=Very high)
7.5 Compared to your competitors, how would you rank usage of technology in your company?
(1= Uses technology more than competitors, 2= Uses technology as much as competitors, 3= Uses
technology less than competitors, 4= Note aware)
8.0 Toxic Aspects of Raw Materials
8.1 Are you aware of the presence of any toxic elements (e.g. Lead, Bromine, Chlorine (PVC),
Nickel, Cadmium, Arsenic, Mercury, Antimony, Chromium, Tin, Others) in raw materials
used for toy manufacturing? (1= Yes, 2= No)
8.2 Are you aware of the permissible limits of toxic chemicals in toys in India? (1= Yes, 2=No)
8.3 Are you aware of the permissible limits of toxic chemicals in toys in the countries you export
to? (1=Yes, 2= No)
9.0 Major Problems & Suggestions

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Research Study on Productivity & Competitiveness of Toy Manufacturing Sector in India

9.1 What are the major problems faced in the recent years. Please explain :
a. Product range , design improvement , variety to cater to the changing needs of the
market:________________________________________________________________________
_______________________________________________________________________
b. Availability of skilled labor, costs & training ____________________________________
c. Procurement of critical raw material /parts & supply chain mechanism , quality & prices &
availability_________________________________________________________
d. Packaging of finished products & Design development
___________________________________________________________________________
e. Promotion , marketing strategies _____________________________________________
f. Quality of support infrastructure for the industry e.g. transportations, power etc.
_______________________________________________________________________________
______________________________________________________________________
g. Finance from institutions for capital investments and working capital
_______________________________________________________________________________
_______________________________________________________________________
h. Dumping of the Chinese Toys in local market

10.0 Government Support

10.1 What are the sources of finance for funding your business?
(1= Banks, 2= Government Agencies 3= Private sources 4= Self, 5= Others, please specify
10.2 Have you received any financial support from Central/State Governments?
(1= Yes, 2=No)
10.2.1 If yes, please provide the details:

10.3 Which of the following areas you need Government support? (Give your options as per your
priority)
(1=Developing training facilities for the industry, 2= Design and Development centre to be set up,
3= Quality of infrastructure, 4= Interface with business, 5= Labour relations, 6= Marketing of
finished products, 7= Export marketing, 8=Customs clearance, 9 = Easy availability of capital, 10 =
Interest rebate for the bank loan, 11 = Others, please specify)
10.4 Please give suggestions for improving the productivity and competitiveness of the toy sector and also
for showcasing the toy products in national and international markets.
______________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
Name of the Official/Investigator: _______________________________________________
Signature : ________________________________________________
Place of Survey : ________________________________________________
Date : _________________________________________________

Name and Signature of Head / Authorized Representative

of the Company / Unit with Seal
Thank you
Question No. 1.5 Note: *
Category of Enterprise Investment in Plant & Machinery
1. Micro Enterprise Does not exceed Rs. 25 Lakhs
2. Small Enterprises More than Rs. 25 lakhs but does not exceed Rs. 5 Crores.
3. Medium Enterprises More than Rs. 5 Crores but does not exceed Rs. 10 Crores
4. Large Enterprises More than Rs. 10 Crores

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Research Study on Productivity & Competitiveness of Toy Manufacturing Sector in India

ANNEXURE 1.2

SURVEY QUESTIONNAIRE FOR TOY MANUFACTURING SECTOR

Company/Manufacturing Unit: Traditional Toy Sector

National Productivity Council, under Ministry of Commerce and Industry, Government of

India, is carrying out a nationwide research study on Productivity & Competitiveness of
Toy Manufacturing Sector in India as a part of XII Plan Project. The objective of this study
is to identify and understand major concerns and issues faced by the sector in terms of
productivity, employment, value addition, domestic and export competitiveness. The study is
expected to come out with specific recommendations to facilitate policy formulation by
Government of India to enhance productivity and export competitiveness of the Toy
Manufacturing Sector in India. The information/data provided would be utilized exclusively
for the study purposes and would be kept confidential.

(Please fill as per instructions given with each question)

Write codes/ values in the box provided at the right hand side)
1.0 General Information
1.1 States Code :
(1=Andhra Pradesh, 2=Gujarat, 3=Karnataka, 4 =Uttar Pradesh, , 5=West
Bengal),
1.2 Product category
1= Terracotta, 2= Toys & Dolls, 3= Paper Toys, 4= Wooden Toys , 5= Cane &
Bamboo,
6= Lacquer ware, 7= Clay Folk Toys , 8= Cloth and Wire Dolls, 10=
Others________________
Unit Name & Address:
1.3 _________________________________________________________________
Contact Person
:_____________________________________________________________________
Telephone No:
Landline______________________________Mobile:__________________________
E-mail address& website if
any:____________________________________________________________
1.4 Year of Establishment:
1.5 Type of Unit
1= Organized Sector (Registered with DIC/others), 2= Unorganized Sector
1.6 What is the category of your Unit?
(1= Micro, 2= Small, 3=Medium, 4=Large)*
1.7 Are you a member of any Toy Manufacturing Association?
(1= Yes, 2=No)
1.7.1 If Yes, please specify Name of the Association:

2.0 Input Related Information

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Research Study on Productivity & Competitiveness of Toy Manufacturing Sector in India

2.1 Employment & Capital Investment

Years Skilled Un Skilled Wages & Capital
workers workers Salaries Investment
(Number) (Number) (Rs. Lakhs) (Rs. Lakhs)
2012-13
2013-14
2014-15
2.2 Whether family members are involved in manufacturing of toys?
(1= Yes, 2= No)
2.3 Whether children are involved in toy making activities?
(1= Yes, 2=No)
2.4 Details related to production, Manufacturing practices & marketing
Years Output Total Sales Total Sales Cost of Production
(Number (Number of Value (Rs. Lakhs)
of unit) unit) (Rs. Lakhs)
2012-13
2013-14
2014-15
2.5 Capacity Utilization of the Unit per day
Sl. Category Unit per Average No. of
No day working hour working days
per day in a Year
1. Installed Capacity
2. Capacity Utilization
3. Idle Capacity
2.6 Source of raw material
(1= Indigenous raw material, 2= Imported raw material )
2.7 Packaging of toys:
(1= Own packaging using local material , 2= Card board packaging with name
of unit, 3= Designer packing, 4= Any other)
3.0 Trade Related Information
3.1 Domestic demand for your products in the recent years
(1=Increased, 2=Decreased, 3=No Change)
3.2 Please indicate the domestic markets methods adopted
(1= Direct marketing, 2= Distributor & Dealer network)
3.3 Do you face competition from similar products in local market?
(1= Yes, 2=No)
3.4 Do You export your toys?
(1=Yes, 2= No)
3.4.1 If yes, How do you undertake export activity?
(1=Directly export to foreign buyers, 2=Through buying houses in India,
3=through agents in India, 4=Others(specify)
3.4.2 Please indicate the export share in total sales value
(1= Less than 25%, 2= 26-50%, 3= 51-75%, 4= Above 75%)

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Research Study on Productivity & Competitiveness of Toy Manufacturing Sector in India

3.5 Do the govt. agencies/ Export Promotion Council provide enough visibility
to the indigenous or traditional toys of the region? (1=Yes, 2=No)
3.6 What are the sources of finance for funding your business?
(1= Banks, 2= Government Agencies, 3= Private sources, 4= Self, 5= Others,---
-----------------
3.7 Are you beneficiary of any scheme implemented by Central / State
Government for promotion of traditional toys industry?
(1= Yes, 2=No)
3.7.1 If yes, Please provide the name of the scheme and benefit received:
________________________________________________________________
_______________
4.0 Competition from Chinese Toy Products
4.1 Are you facing competition from China toy products? (1-Yes, 2=No)
4.1.1 If Yes, how would you compare quality of your products with Chinese
products?
(1= Quality is better than Chinese products, 2=Quality same as Chinese
products, 3. Quality is lower than Chinese products)
4.2 How much cheaper are Chinese toys as compared to similar toys produced
by your unit?
(1= <10%, 2=10-25%, 3=25-50%, 4= >50%)
5.0 Problems and Support Required
5.1 What according to you are the major problems for the traditional toy sector :
i. Product range , design improvement , variety to cater to the changing needs of
the
market___________________________________________________________
j. Availability of skilled labor, costs & training
________________________________________________________________
k. Procurement of critical raw material /parts & supply chain mechanism , quality
& prices &
availability_______________________________________________________
l. Packaging of finished products & Design development
______________________________
m. Promotion , marketing strategies
_____________________________________________
n. Quality of support infrastructure for the industry e.g. transportations, power etc.
________________________________________________________________
o. Finance from institutions for capital investments and working capital
________________________________________________________________
5.2 Please indicate the areas where you need government support
(1= Developing training facilities for the toys industry, 2= Design and
development centers to be set-up, 3= Quality of infrastructure, 4= Interface with
business, 5= Labor relations, 6= Marketing of traditional toys, 7= Exports
marketing, 8= Easy Availability of capital, 9= Others ( Please specify
5.3 Please give suggestion on the measures required for showcasing the traditional

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Research Study on Productivity & Competitiveness of Toy Manufacturing Sector in India

toys in national and international markets.

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
__________________________
5.4 Any other suggestions please specify:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_______

Name of the Official/Investigator:

________________________________________________
Signature :
________________________________________________
Place of Survey :
________________________________________________
Date :
_________________________________________________

Name and Signature of Head / Authorized Representative

of the Company / Unit with Seal

Thank you
Question No. 1.6 Note: *
Category of Enterprise Investment in Plant & Machinery
5. Micro Enterprise Does not exceed Rs. 25 Lakhs
6. Small Enterprises More than Rs. 25 lakhs but does not exceed Rs. 5 Crores.
7. Medium Enterprises More than Rs. 5 Crores but does not exceed Rs. 10 Crores
8. Large Enterprises More than Rs. 10 Crores

National Productivity Council, New Delhi Page 101